Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2016

Fair Value of Financial Instruments [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, 2016 and December 31, 2015, by caption on the consolidated balance sheets and by FASB ASC 820 valuation hierarchy (as described above) (in thousands):

June 30, 2016	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)
Investment securities available-for-sale:
U.S. treasury securities	$	-	$	-	$	-	$	-
U.S. government agency securities		96,447		-		96,447		-
Mortgage-backed securities		771,950		-		771,950		-
State and municipal securities		169,077		-		169,077		-
Agency-backed securities		67,344		-		67,344		-
Corporate notes and other		4,403		-		4,403		-
Total investment securities available-for-sale	$	1,109,221	$	-	$	1,109,221	$	-
Other investments		10,381		-		-		10,381
Other assets		36,893		-		36,893		-
Total assets at fair value	$	1,156,495	$	-	$	1,146,114	$	10,381

Other liabilities	$	38,983	$	-	$	38,983	$	-
Total liabilities at fair value	$	38,983	$	-	$	38,983	$	-

December 31, 2015
Investment securities available-for-sale:
U.S. treasury securities	$	-	$	-	$	-	$	-
U.S. government agency securities		128,193		-		128,193		-
Mortgage-backed securities		582,916		-		582,916		-
State and municipal securities		165,042		-		165,042		-
Agency-backed securities		48,801		-		48,801		-
Corporate notes and other		10,113		-		10,113		-
Total investment securities available-for-sale		935,065		-		935,065		-
Other investments		9,764		-		-		9,764
Other assets		15,147		-		15,147		-
Total assets at fair value	$	959,976	$	-	$	950,212	$	9,764

Other liabilities	$	16,568	$	-	$	16,568	$	-
Total liabilities at fair value	$	16,568	$	-	$	16,568	$	-

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, 2016 and December 31, 2015 (in thousands):

June 30, 2016	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)		Total losses for the year-to-date period then ended
Other real estate owned	$	5,006	$	-	$	-	$	5,006	$	(219	)
Collateral dependent nonaccrual loans, net		26,752		-		-		26,752		(2,804	)
Total	$	31,758	$	-	$	-	$	31,758	$	(3,023	)

December 31, 2015
Other real estate owned	$	5,083	$	-	$	-	$	5,083	$	(41	)
Collateral dependent nonaccrual loans, net		18,958		-		-		18,958		(2,637	)
Total	$	24,041	$	-	$	-	$	24,041	$	(2,678	)

Rollforward of the Balance Sheet Amounts, Unobservable Input Reconciliation

The table below includes a rollforward of the balance sheet amounts for the six months ended June 30, 2016 (including the change in fair value) for financial instruments classified by Pinnacle Financial within Level 3 of the valuation hierarchy for assets and liabilities measured at fair value on a recurring basis. When a determination is made to classify a financial instrument within Level 3 of the valuation hierarchy, the determination is based upon the significance of the unobservable factors to the overall fair value measurement. However, since Level 3 financial instruments typically include, in addition to the unobservable or Level 3 components, observable components (that is, components that are actively quoted and can be validated to external sources), the gains and losses in the table below include changes in fair value due in part to observable factors that are part of the valuation methodology (in thousands):

	For the six months ended June 30,
	2016					2015
	Other assets			Other liabilities		Other assets			Other liabilities
Fair value, January 1	$	9,764		$	-	$	8,004		$	-
Total realized gains included in income		336			-		173			-
Change in unrealized gains/losses included in other comprehensive income for assets and liabilities still held at period end		-			-		-			-
Purchases		571			-		548			-
Issuances		-			-		-			-
Settlements		(290	)		-		(563	)		-
Transfers out of Level 3		-			-		-			-
Fair value, June 30		10,381			-		8,162			-
Total realized gains included in income related to financial assets and liabilities still on the consolidated balance sheet at June 30	$	336		$	-	$	173		$	-

Carrying Amounts, Estimated Fair Value and Placement in the Fair Value hierarchy of Financial Instruments

The following table presents the carrying amounts, estimated fair value and placement in the fair value hierarchy of Pinnacle Financial's financial instruments at June 30, 2016 and December 31, 2015. This table excludes financial instruments for which the carrying amount approximates fair value. For short-term financial assets such as cash and cash equivalents, 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).

(in thousands) June 30, 2016	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)
Financial assets:
Securities held-to-maturity	$	28,512	$	29,093	$	-	$	29,093	$	-
Loans, net		7,029,990		6,972,722		-		-		6,972,722
Mortgage loans held-for-sale		53,119		54,335		-		54,335		-
Loans held-for-sale		9,323		9,531		-		9,531		-

Financial liabilities:
Deposits and securities sold under
agreements to repurchase		7,366,143		7,054,670		-		-		7,054,670
Federal Home Loan Bank advances		783,240		783,733		-		-		783,733
Subordinated debt and other borrowings		229,714		211,594		-		-		211,594

Off-balance sheet instruments:
Commitments to extend credit ⁽²⁾		2,548,355		700		-		-		700
Standby letters of credit ⁽³⁾		101,845		486		-		-		486


December 31, 2015
Financial assets:
Securities held-to-maturity	$	31,377	$	31,586	$	-	$	31,586	$	-
Loans, net		6,477,803		6,379,153		-		-		6,379,153
Mortgage loans held for sale		47,930		48,365		-		48,365		-

Financial liabilities:
Deposits and securities sold under
agreements to repurchase		7,050,498		6,562,509		-		-		6,562,509
Federal Home Loan Bank advances		300,305		299,214		-		-		299,214
Subordinated debt and other borrowings		141,606		131,494		-		-		131,494

Off-balance sheet instruments:
Commitments to extend credit ⁽²⁾		2,218,784		1,017		-		-		1,017
Standby letters of credit ⁽³⁾		93,534		354		-		-		354

(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. In making this evaluation, Pinnacle Financial evaluates the credit worthiness of the borrower, the collateral supporting the commitments and any other factors similar to those used to evaluate the inherent risks of our loan portfolio. Additionally, Pinnacle Financial evaluates the probability that the outstanding commitment will eventually become a funded loan. As a result, at June 30, 2016 and December 31, 2015, Pinnacle Financial included in other liabilities $700,000 and $1.0 million, respectively, representing the inherent risks associated with these off-balance sheet commitments.

(3)

At June 30, 2016 and December 31, 2015, the fair value of Pinnacle Financial's standby letters of credit was $486,000 and $354,000, respectively. This amount represents the unamortized fee associated with these standby letters of credit and is included in the consolidated balance sheet of Pinnacle Financial and is believed to approximate fair value. This fair value will decrease over time as the existing standby letters of credit approach their expiration dates.