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Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2023

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, 2023 and December 31, 2022, 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, 2023
Investment securities available-for-sale:
U.S. Treasury securities			$	208,613					$	—					$	208,613					$	—
U.S. Government agency securities			282,054						—						282,054						—
Mortgage-backed securities			949,374						—						949,374						—
State and municipal securities			1,546,640						—						1,546,161						479
Agency-backed securities			161,861						—						161,861						—
Corporate notes and other			442,738						—						442,738						—
Total investment securities available-for-sale			3,591,280						—						3,590,801						479
Other investments			173,781						—						22,019						151,762
Other assets			227,850						—						227,850						—
Total assets at fair value			$	3,992,911					$	—					$	3,840,670					$	152,241
Other liabilities			$	110,242					$	—					$	110,242					$	—
Total liabilities at fair value			$	110,242					$	—					$	110,242					$	—

			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)
December 31, 2022
Investment securities available-for-sale:
U.S. Treasury securities			$	194,184					$	—					$	194,184					$	—
U.S. Government agency securities			396,157						—						396,157						—
Mortgage-backed securities			971,576						—						971,576						—
State and municipal securities			1,412,306						—						1,411,677						629
Agency-backed securities			117,403						—						117,403						—
Corporate notes and other			467,244						—						467,244						—
Total investment securities available-for-sale			3,558,870						—						3,558,241						629
Other investments			153,011						—						22,029						130,982
Other assets			190,629						—						190,629						—
Total assets at fair value			$	3,902,510					$	—					$	3,770,899					$	131,611
Other liabilities			$	96,483					$	—					$	96,483					$	—
Total liabilities at fair value			$	96,483					$	—					$	96,483					$	—

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, 2023 and December 31, 2022 (in thousands):

June 30, 2023			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			$	2,555					$	—					$	—					$	2,555
Collateral dependent loans (1)			40,241						—						—						40,241
Total			$	42,796					$	—					$	—					$	42,796
December 31, 2022
Other real estate owned			$	7,952					$	—					$	—					$	7,952
Collateral dependent loans (1)			33,767						—						—						33,767
Total			$	41,719					$	—					$	—					$	41,719

(1) The carrying values of collateral dependent loans at June 30, 2023 and December 31, 2022 are net of valuation allowances of $6.2 million and $6.5 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, 2023 and 2022 (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,
			2023						2022									2023						2022
			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			$	479		$	141,010					$	662		$	106,694								$	629		$	130,982					$	828		$	100,996
Total realized gains included in income			1			1,314						1			6,669									2			3,674						3			8,379
Changes in unrealized gains/losses included in other comprehensive income (loss)			(1)			—						(7)			—									7			—						(17)			—
Purchases			—			10,730						—			11,352									—			19,932						—			18,763
Issuances			—			—						—			—									—			—						—			—
Settlements			—			(1,292)						—			(3,104)									(159)			(2,826)						(158)			(6,527)
Transfers out of Level 3			—			—						—			—									—			—						—			—
Fair value, end of period			$	479		$	151,762					$	656		$	121,611								$	479		$	151,762					$	656		$	121,611
Total realized gains included in income			$	1		$	1,314					$	1		$	6,669								$	2		$	3,674					$	3		$	8,379

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, 2023 and December 31, 2022. 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 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, 2023
Financial assets:
Securities purchased with agreement to resell			$	507,235					$	454,232					$	—					$	—					$	454,232
Securities held-to-maturity			3,032,177						2,746,055						—						2,746,055						—
Loans, net			30,815,831						29,839,196						—						—						29,839,196
Consumer loans held-for-sale			85,981						86,301						—						86,301						—
Commercial loans held-for-sale			22,713						22,798						—						22,798						—
Financial liabilities:
Deposits and securities sold under
agreements to repurchase			37,886,435						36,655,126						—						—						36,655,126
Federal Home Loan Bank advances			2,200,917						2,205,197						—						—						2,205,197
Subordinated debt and other borrowings			424,497						437,728						—						—						437,728

			Carrying 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, 2022
Financial assets:
Securities purchased with agreement to resell			$	513,276					$	440,390					$	—					$	—					$	440,390
Securities held-to-maturity			3,079,050						2,744,946						—						2,744,946						—
Loans, net			28,740,940						27,901,662						—						—						27,901,662
Consumer loans held-for-sale			42,237						42,353						—						42,353						—
Commercial loans held-for-sale			21,093						21,151						—						21,151						—
Financial liabilities:
Deposits and securities sold under
agreements to repurchase			35,156,148						34,435,447						—						—						34,435,447
Federal Home Loan Bank advances			464,436						477,673						—						—						477,673
Subordinated debt and other borrowings			424,055						430,884						—						—						430,884

(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.

X

- 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).

+ References

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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 the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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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).

+ References

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