PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 4. Securities

The amortized cost and fair value of securities available-for-sale and held-to-maturity at March 31, 2016 and December 31, 2015 are summarized as follows (in thousands):

	Amortized Cost			Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
March 31, 2016
Securities available-for-sale:
U.S. Treasury securities		$	-	$	-	$	-	$	-
U.S. government agency securities			130,459		75		1,067		129,467
Mortgage-backed agency securities			657,409		9,693		1,393		665,709
State and municipal securities			157,422		8,358		35		165,745
Asset-backed securities			48,225		-		1,212		47,013
Corporate notes and other			8,733		683		20		9,396
		$	1,002,248	$	18,809	$	3,727	$	1,017,330
Securities held-to-maturity:
State and municipal securities		$	31,089	$	435	$	3	$	31,521
		$	31,089	$	435	$	3	$	31,521

December 31, 2015:
Securities available-for-sale:
U.S. Treasury securities		$	-	$	-	$	-	$	-
U.S. government agency securities			131,499		3		3,309		128,193
Mortgage-backed agency securities			581,998		5,948		5,030		582,916
State and municipal securities			158,072		7,094		124		165,042
Asset-backed securities			49,598		8		805		48,801
Corporate notes and other			9,541		589		17		10,113
		$	930,708	$	13,642		9,285	$	935,065
Securities held-to-maturity:
State and municipal securities		$	31,377	$	257	$	48	$	31,586
		$	31,377	$	257	$	48	$	31,586

At March 31, 2016, approximately $828.5 million of securities within Pinnacle Financial's investment portfolio were either pledged to secure public funds and other deposits or securities sold under agreements to repurchase. At March 31, 2016 repurchase agreements comprised of secured borrowings totaled $62.8 million and were secured by $62.8 million of pledged U.S. government agency securities, municipal securities, asset backed securities, and corporate debentures. The fair value of securities pledged to secure repurchase agreements may decline. As the fair value of securities pledged to secure repurchase agreements may decline, the company regularly evaluates its need to pledge additional securities to remain adequately secured.

The amortized cost and fair value of debt securities as of March 31, 2016 by contractual maturity are shown below. Actual maturities may differ from contractual maturities of mortgage- and asset-backed securities since the mortgages and assets underlying the securities may be called or prepaid with or without penalty. Therefore, these securities are not included in the maturity categories in the following summary (in thousands):

	Available-for-sale				Held-to-maturity
March 31, 2016:	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	5,392	$	5,418	$	1,212	$	1,214
Due in one year to five years		33,915		36,365		8,629		8,704
Due in five years to ten years		191,294		196,034		12,745		13,014
Due after ten years		66,013		66,791		8,503		8,589
Mortgage-backed securities		657,409		665,709		-		-
Asset-backed securities		48,225		47,013		-		-
	$	1,002,248	$	1,017,330	$	31,089	$	31,521

PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

At March 31, 2016 and December 31, 2015, the following investments had unrealized losses. The table below classifies these investments according to the term of the unrealized losses of less than twelve months or twelve months or longer (in thousands):

	Investments with an Unrealized Loss of less than 12 months				Investments with an Unrealized Loss of 12 months or longer				Total Investments with an Unrealized Loss
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
At March 31, 2016

U.S. Treasury securities	$	-	$	-	$	-	$	-	$	-	$	-
U.S. government agency securities		16,755		712		41,188		355		57,943		1,067
Mortgage-backed securities		122,091		549		69,670		844		191,761		1,393
State and municipal securities		899		12		4,404		26		5,303		38
Asset-backed securities		32,802		917		14,210		295		47,012		1,212
Corporate notes		1,232		20		-		-		1,232		20
Total temporarily-impaired securities	$	173,779	$	2,210	$	129,472	$	1,520	$	303,251	$	3,730

At December 31, 2015

U.S. Treasury securities	$	-	$	-	$	-	$	-	$	-	$	-
U.S. government agency securities		61,903		1,702		65,538		1,607		127,441		3,309
Mortgage-backed securities		338,230		2,789		103,003		2,241		441,233		5,030
State and municipal securities		6,509		38		6,135		134		12,644		172
Asset-backed securities		41,466		798		3,539		7		45,005		805
Corporate notes		2,554		17		-		-		2,554		17
Total temporarily-impaired securities	$	450,662	$	5,344	$	178,215	$	3,989	$	628,877	$	9,333

The applicable dates for determining when securities are in an unrealized loss position are March 31, 2016 and December 31, 2015. As such, it is possible that a security had a market value that exceeded its amortized cost on other days during the past twelve-month periods ended March 31, 2016 and December 31, 2015, but is in the "Investments with an Unrealized Loss of less than 12 months" category above.

As shown in the tables above, at March 31, 2016, Pinnacle Financial had approximately $3.7 million in unrealized losses on $303.3 million of securities. The unrealized losses associated with these investment securities are driven by changes in interest rates and the unrealized loss is recorded as a component of equity. These securities will continue to be monitored as a part of our ongoing impairment analysis, but are expected to perform even if the rating agencies reduce the credit rating of the bond issuers. Management evaluates the financial performance of the issuers on a quarterly basis to determine if it is probable that the issuers can make all contractual principal and interest payments. If a shortfall in future cash flows is identified, a credit loss will be deemed to have occurred and will be recognized as a charge to earnings and a new cost basis for the security will be established.

Because Pinnacle Financial currently does not intend to sell those securities that have an unrealized loss at March 31, 2016, and it is not more-likely-than-not that Pinnacle Financial will be required to sell the securities before recovery of their amortized cost bases, which may be maturity, Pinnacle Financial does not consider these securities to be other-than-temporarily impaired at March 31, 2016.

Periodically, available-for-sale securities may be sold or the composition of the portfolio realigned to improve yields, quality or marketability, or to implement changes in investment or asset/liability strategy, including maintaining collateral requirements and raising funds for liquidity purposes. Additionally, if an available-for-sale security loses its investment grade or tax-exempt status, the underlying credit support is terminated or collection otherwise becomes uncertain based on factors known to management, Pinnacle Financial will consider selling the security, but will review each security on a case-by-case basis as these factors become known.

The carrying values of Pinnacle Financial's investment securities could decline in the future if the financial condition of issuers deteriorates and management determines it is probable that Pinnacle Financial will not recover the entire amortized cost bases of the securities. As a result, there is a risk that other-than-temporary impairment charges may occur in the future. Additionally, there is a risk that other-than-temporary impairment charges may occur in the future if management's intention to hold these securities to maturity and or recovery changes.

PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)