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Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2022

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 March 31, 2022 and December 31, 2021, 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)
March 31, 2022
Investment securities available-for-sale:
U.S. Treasury securities			$	81,164					$	—					$	81,164					$	—
U.S. Government agency securities			429,948						—						429,948						—
Mortgage-backed securities			1,530,564						—						1,530,564						—
State and municipal securities			1,247,165						—						1,246,503						662
Agency-backed securities			166,379						—						166,379						—
Corporate notes and other			114,503						—						114,503						—
Total investment securities available-for-sale			3,569,723						—						3,569,061						662
Other investments			130,500						—						23,806						106,694
Other assets			75,202						—						75,202						—
Total assets at fair value			$	3,775,425					$	—					$	3,668,069					$	107,356
Other liabilities			$	50,083					$	—					$	50,083					$	—
Total liabilities at fair value			$	50,083					$	—					$	50,083					$	—
December 31, 2021
Investment securities available-for-sale:
U.S. Treasury securities			$	193,609					$	—					$	193,609					$	—
U.S. Government agency securities			632,009						—						632,009						—
Mortgage-backed securities			1,920,239						—						1,920,239						—
State and municipal securities			1,823,837						—						1,823,009						828
Agency-backed securities			229,569						—						229,569						—
Corporate notes and other			114,931						—						114,931						—
Total investment securities available-for-sale			4,914,194						—						4,913,366						828
Other investments			125,969						—						24,973						100,996
Other assets			57,441						—						57,441						—
Total assets at fair value			$	5,097,604					$	—					$	4,995,780					$	101,824
Other liabilities			$	80,106					$	—					$	80,106					$	—
Total liabilities at fair value			$	80,106					$	—					$	80,106					$	—

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 March 31, 2022 and December 31, 2021 (in thousands):

March 31, 2022			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			$	8,237					$	—					$	—					$	8,237
Collateral dependent loans (1)			27,343						—						—						27,343
Total			$	35,580					$	—					$	—					$	35,580
December 31, 2021
Other real estate owned			$	8,537					$	—					$	—					$	8,537
Collateral dependent loans (1)			30,799						—						—						30,799
Total			$	39,336					$	—					$	—					$	39,336

(1) The carrying values of collateral dependent loans at March 31, 2022 and December 31, 2021 are net of valuation allowances of $1.6 million and $1.7 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 months ended March 31, 2022 and March 31, 2021 (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 March 31,
			2022						2021
			Available-for-sale Securities			Other investments						Available-for-sale Securities			Other  investments
Fair value, beginning of period			$	828		$	100,996					$	15,497		$	47,759
Total realized gains included in income			2			1,710						42			3,440
Changes in unrealized gains/losses included in other comprehensive income			(10)			—						(1,875)			—
Purchases			—			7,411						—			12,432
Issuances			—			—						—			—
Settlements			(158)			(3,423)						(151)			(1,502)
Transfers out of Level 3			—			—						—			—
Fair value, end of period			$	662		$	106,694					$	13,513		$	62,129
Total realized gains included in income			$	2		$	1,710					$	42		$	3,440

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 March 31, 2022 and December 31, 2021. 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)
March 31, 2022
Financial assets:
Securities purchased with agreement to resell			$	1,332,753					$	1,256,507					$	—					$	—					$	1,256,507
Securities held-to-maturity			2,566,386						2,432,654						—						2,432,654						—
Loans, net			24,237,404						23,927,906						—						—						23,927,906
Consumer loans held-for-sale			67,224						66,811						—						66,811						—
Commercial loans held-for-sale			35,383						35,166						—						35,166						—
Financial liabilities:
Deposits and securities sold under
agreements to repurchase			32,515,344						31,458,595						—						—						31,458,595
Federal Home Loan Bank advances			888,870						893,481						—						—						893,481
Subordinated debt and other borrowings			423,319						458,378						—						—						458,378
Off-balance sheet instruments:
Commitments to extend credit (2)			13,883,896						25,100						—						—						25,100

			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)
December 31, 2021
Financial assets:
Securities purchased with agreement to resell			$	1,000,000					$	980,543					$	—					$	—					$	980,543
Securities held-to-maturity			1,155,958						1,188,049						—						1,188,049						—
Loans, net			23,151,029						23,223,299						—						—						23,223,299
Consumer loans held-for-sale			45,806						46,288						—						46,288						—
Commercial loans held-for-sale			17,685						17,871						—						17,871						—
Financial liabilities:
Deposits and securities sold under
agreements to repurchase			31,457,092						30,812,222						—						—						30,812,222
Federal Home Loan Bank advances			888,681						1,006,866						—						—						1,006,866
Subordinated debt and other borrowings			423,172						479,879						—						—						479,879
Off-balance sheet instruments:
Commitments to extend credit (2)			13,063,942						24,351						—						—						24,351

(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 March 31, 2022 and December 31, 2021, Pinnacle Financial included in other liabilities $23.0 million and $22.5 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 March 31, 2022 and December 31, 2021 are unamortized fees related to these commitments of $2.1 million and $1.9 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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-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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