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Derivative Instruments | 12 Months Ended
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Dec. 31, 2021
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments | Note 14. Derivative Instruments Financial derivatives are reported at fair value in other assets or other liabilities. The accounting for changes in the fair value of a derivative depends on whether it has been designated and qualifies as part of a hedging relationship. For derivatives not designated as hedges, the gain or loss is recognized in current earnings. Non-hedge derivatives For derivatives not designated as hedges, the gain or loss is recognized in current period earnings. Pinnacle Financial enters into interest rate swaps (swaps) to facilitate customer transactions and meet their financing needs. Upon entering into these instruments to meet customer needs, Pinnacle Financial enters into offsetting positions in order to minimize the risk to Pinnacle Financial. These swaps qualify as derivatives, but are not designated as hedging instruments. The income statement impact of the offsetting positions is limited to changes in the reserve for counterparty credit risk. A summary of Pinnacle Financial's interest rate swaps to facilitate customer transactions as of December 31, 2021 and 2020 is included in the following table (in thousands):
| December 31, 2021 |  | December 31, 2020
| Notional Amount |  | Estimated Fair Value |  | Notional Amount |  | Estimated Fair Value
Interest rate swap agreements: |  |  |  |  |  |  |
Assets | $ | 1,540,992 |  |  | $ | 39,770 |  |  | $ | 1,565,916 |  |  | $ | 101,602 |
Liabilities | 1,540,992 |  |  | (40,241) |  |  | 1,565,916 |  |  | (102,919) |
Total | $ | 3,081,984 |  |  | $ | (471) |  |  | $ | 3,131,832 |  |  | $ | (1,317) |
The effects of Pinnacle Financial's interest rate swaps to facilitate customers' transactions on the income statement during the years ended December 31, 2021, 2020 and 2019 were as follows (in thousands):
|  |  | Amount of Gain (Loss) Recognized in Income
| Location of Gain (Loss) Recognized in Income |  | Year ended December 31,
|  | 2021 |  | 2020 |  | 2019
Interest rate swap agreements | Other noninterest income |  | $ | 846 |  |  | $ | (1,109) |  |  | $ | (80) |
Derivatives designated as cash flow hedges For derivative instruments that are designated and qualify as a cash flow hedge, the aggregate fair value of the derivative instrument is recorded in other assets or other liabilities with any gain or loss related to changes in fair value recorded in accumulated other comprehensive income, net of tax. The gain or loss is reclassified into earnings in the same period during which the hedged asset or liability affects earnings and is presented in the same income statement line item as the earnings effect of the hedged asset or liability. Pinnacle Financial uses forward cash flow hedge relationships in an effort to manage future interest rate exposure. The hedging strategy converts the LIBOR-based variable interest rate on forecasted borrowings to a fixed interest rate and is used in an effort to protect Pinnacle Financial from floating interest rate variability. A summary of Pinnacle Financial's cash flow hedge relationships as of December 31, 2021 and 2020 are as follows (in thousands):
|  |  |  |  | December 31, 2021 | December 31, 2020
| Balance Sheet Location | Weighted Average Remaining Maturity (In Years) | Weighted Average Pay Rate | Receive Rate | Notional Amount | Estimated Fair Value | Notional Amount | Estimated Fair Value
Asset derivatives |  |  |  |  |  |  |  |
Interest rate floor - loans | Other assets | 0.00 | —% | 2.25% minus 1 month LIBOR | $ | — |  | $ | — |  | $ | 1,500,000 |  | $ | 124,585 |
The effects of Pinnacle Financial's cash flow hedge relationships on the statement of comprehensive income (loss) during the years ended December 31, 2021, 2020 and 2019 were as follows (in thousands):
| Amount of Gain (Loss) Recognized in Other Comprehensive Income
| Years ended December 31,
| 2021 |  | 2020 |  | 2019
Asset derivatives |  |  |  |  |
Interest rate floor - loans | $ | (15,034) |  |  | $ | 62,979 |  |  | $ | (1,432) |
Liability derivatives |  |  |  |  |
Interest rate swaps - borrowings | $ | — |  |  | $ | 2,447 |  |  | $ | (1,149) |
| $ | (15,034) |  |  | $ | 65,426 |  |  | $ | (2,581) |
The cash flow hedges were determined to be highly effective during the periods presented and as a result qualified for hedge accounting treatment. If a hedge were deemed to be ineffective, the amount included in accumulated other comprehensive income (loss) would be reclassified into a line item within the statement of income that impacts operating results. A hedging relationship is no longer considered to be effective if a portion of the hedge becomes ineffective, the item hedged is no longer in existence or Pinnacle Financial discontinues hedge accounting. Gains on cash flow hedges totaling $9.6 million, net of tax, were reclassified from accumulated other comprehensive income (loss) into net income during the year ended December 31, 2021. Losses on cash flow hedges totaling $5.5 million and $1.6 million, net of tax, were reclassified from other comprehensive income (loss) into net income during the years ended December 31, 2020 and 2019, respectively. Approximately $10.0 million in unrealized gains, net of tax, are expected to be reclassified from accumulated other comprehensive income (loss) into net income over the next twelve months. Derivatives designated as fair value hedges For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative instrument as well as the offsetting loss or gain on the hedged asset or liability attributable to the hedged risk are recognized in current earnings. The gain or loss on the derivative instrument is presented on the same income statement line item as the earnings effect of the hedged item. Pinnacle Financial utilizes interest rate swaps designated as fair value hedges to mitigate the effect of changing interest rates on the fair values of fixed rate callable securities available-for-sale. The hedging strategy on securities converts the fixed interest rates to LIBOR or federal funds rates. These derivatives are designated as partial term hedges of selected cash flows covering specified periods of time prior to the call dates of the hedged securities. A summary of Pinnacle Financial's fair value hedge relationships as of December 31, 2021 and 2020 are as follows (in thousands):
|  |  |  |  |  |  |  |  |  | December 31, 2021 |  | December 31, 2020
|  | Balance Sheet Location |  | Weighted Average Remaining Maturity (In Years) |  | Weighted Average Pay Rate |  | Receive Rate |  | Notional Amount |  | Estimated Fair Value |  | Notional Amount |  | Estimated Fair Value
Asset derivatives |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swap agreements - securities |  | Other assets |  | 5.30 |  | 0.59% |  | Federal funds |  | $ | 559,820 |  |  | $ | 15,109 |  |  | $ | 231,421 |  |  | $ | 4,696 |
Liability derivatives |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swap agreements - securities |  | Other liabilities |  | 5.03 |  | 3.08% |  | 3 month LIBOR |  | 471,670 |  |  | (39,781) |  |  | 477,510 |  |  | (72,010) |
|  |  |  |  |  |  |  |  |  | $ | 1,031,490 |  |  | $ | (24,672) |  |  | $ | 708,931 |  |  | $ | (67,314) |
Notional amounts totaling $471.7 million included in the table above receive a variable rate of interest based on three month LIBOR and notional amounts totaling $559.8 million receive a variable rate of interest based on the daily compounded federal funds rate. The effects of Pinnacle Financial's fair value hedge relationships on the income statement during the years end December 31, 2021, 2020 and 2019 were as follows (in thousands):
| Location of Gain (Loss) |  | Amount of Gain (Loss) Recognized in Income
|  | Year ended December 31,
Securities |  | 2021 |  | 2020 |  | 2019
Interest rate swap agreements | Interest income on securities |  | $ | 42,642 |  |  | $ | (26,536) |  |  | $ | (25,982) |
Securities available-for-sale | Interest income on securities |  | $ | (42,642) |  |  | $ | 26,536 |  |  | $ | 25,982 |
| Location of Gain (Loss) |  | Amount of Loss Recognized in Income
|  | Years ended December 31,
Loans |  | 2021 |  | 2020 |  | 2019
Interest rate swap agreements | Interest income on loans |  | $ | — |  |  | $ | — |  |  | $ | (6,915) |
Loans | Interest income on loans |  | $ | — |  |  | $ | — |  |  | $ | 6,915 |
The following amounts were recorded on the balance sheet related to cumulative basis adjustments for fair value hedges at December 31, 2021 and 2020 (in thousands):
| Carrying Amount of the Hedged Assets |  | Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets
| December 31, 2021 |  | December 31, 2020 |  | December 31, 2021 |  | December 31, 2020
Line item on the balance sheet |  |  |  |  |  |  |
Securities available-for-sale | $ | 1,165,773 |  |  | $ | 841,543 |  |  | $ | 24,672 |  |  | $ | 67,314 |
During the years ended December 31, 2021, 2020 and 2019 amortization expense totaling $3.5 million, $4.3 million and $2.7 million, respectively, related to previously terminated fair value hedges was recognized as a reduction to interest income on loans.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 40 -Section 50 -Paragraph 5 -Subparagraph (f) -URI http://asc.fasb.org/extlink&oid=123477628&loc=d3e90205-114008 + Details
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