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Derivative Instruments
 12 Months Ended
Dec. 31, 2016
Derivative Instruments [Abstract]  
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

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.

Interest rate swap contracts involve the risk of dealing with counterparties and their ability to meet contractual terms. When the fair value of a derivative instrument contract is positive, this generally indicates that the counter party or customer owes Pinnacle Financial, and results in credit risk to Pinnacle Financial.  When the fair value of a derivative instrument contract is negative, Pinnacle Financial owes the customer or counterparty and therefore, Pinnacle Financial has no credit risk.

A summary of Pinnacle Financial's interest rate swaps to facilitate customer transactions as of December 31, 2016 and December 31, 2015 is included in the following table (in thousands):

  
December 31, 2016
  
December 31, 2015
 
  
Notional
Amount
  
Estimated Fair Value
  
Notional Amount
  
Estimated Fair Value
 
Interest rate swap agreements:
            
Pay fixed / receive variable swaps
 
$
666,572
  
$
16,004
  
$
396,112
  
$
16,130
 
Pay variable / receive fixed swaps
  
666,572
   
(16,138
)
  
396,112
   
(16,329
)
Total
 
$
1,333,144
  
$
(134
)
 
$
792,224
  
$
(199
)

Hedge derivatives

Pinnacle Financial has forward cash flow hedge relationships 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 protects Pinnacle Financial from floating interest rate variability. The terms of the individual contracts within the relationship are as follows (in thousands):
 
 
  
 
  
         
 
December 31, 2016
  
December 31, 2015
 
 
Forecasted
Notional
Amount
 
Receive Rate
Pay
Rate
 
Term(1)
 
Asset/
(Liabilities)
  
Unrealized Loss in Accumulated Other Comprehensive Income
  
Asset/ (Liabilities)
  
Unrealized Loss in Accumulated Other Comprehensive Income
 
Interest Rate Swap$ 33,000 3 month LIBOR 2.265%  April 2016 - April 2020   (727)    (442)    (784)    (476) 
Interest Rate Swap
 
33,000
 
3 month LIBOR
2.646
%
April 2016 - April 2022
  
(1,304
)
  
(792
)
  
(1,478
)
  
(898
)
Interest Rate Swap
 
33,000
 
3 month LIBOR
2.523
%
Oct. 2016 - Oct. 2020
  
(1,081
)
  
(657
)
  
(908
)
  
(552
)
Interest Rate Swap
 
33,000
 
3 month LIBOR
2.992
%
Oct. 2017 - Oct. 2021
  
(1,200
)
  
(729
)
  
(1,112
)
  
(676
)
Interest Rate Swap
 
34,000
 
3 month LIBOR
3.118
%
April 2018 - July 2022
  
(1,222
)
  
(743
)
  
(1,170
)
  
(711
)
Interest Rate Swap
 
34,000
 
3 month LIBOR
3.158
%
July 2018 - Oct. 2022
  
(1,198
)
  
(728
)
  
(1,158
)
  
(704
)
 
$
200,000
       
(6,732
)
  
(4,091
)
  
(6,610
)
  
(4,017
) 
 
   
 
  
 
                
(1)
No cash will be exchanged prior to the beginning of the term.
 
 
 
Pinnacle Financial has interest rate swap agreements designated as cash flow hedges intended to protect against the variability of cash flows on selected LIBOR based loans. The swaps hedge the interest rate risk, wherein Pinnacle Financial receives a fixed rate of interest from a counterparty and pays a variable rate, based on one month LIBOR. The swaps were entered into with a counterparty that met Pinnacle Financial's credit standards and the agreements contain collateral provisions protecting the at-risk party. Pinnacle Financial believes that the credit risk inherent in the contract is not significant.

 
    
 
         
 
December 31, 2016
  
December 31, 2015
 
 
Forecasted
Notional
Amount
 
Receive
Rate
 
Pay
Rate
Term
 
Asset/
(Liabilities)
  
Unrealized Gain (Loss) in Accumulated Other Comprehensive Income
  
Asset/ (Liabilities)
  
Unrealized Gain (Loss) in Accumulated Other Comprehensive Income
 
Interest Rate Swap
$
27,500
 
2.090
%
1 month LIBOR
July 2014 - July 2021
 
395
 
240
 
  
663
   
403
 
Interest Rate Swap
 
25,000
 
2.270
%
1 month LIBOR
July 2014 - July 2022
 
610
  
371
   
968
   
588
 
Interest Rate Swap
 
27,500
 
2.420
%
1 month LIBOR
July 2014 - July 2023
  874   531   
1,320
   
802
 
Interest Rate Swap
 
30,000
 
2.500
%
1 month LIBOR
July 2014 - July 2024
 
900
  
547
   
1,333
   
810
 
Interest Rate Swap
 
-
 
1.048
%
1 month LIBOR
August 2015 - August 2018
 
-
 
 
-
 
  
(46
)  
(28
)
Interest Rate Swap
 
-
 
1.281
%
1 month LIBOR
August 2015 - August 2019
 
-
 
 
-
 
  
(34
)  
(21
)
Interest Rate Swap
 
15,000
 
1.470
%
1 month LIBOR
August 2015 - August 2020
 
(75
)
 
(46
)
  
(14
)  
(9
)
 
$
125,000
   
 
 
 
2,704
 
 
1,643
 
  
4,190
   
2,545
 
  
The cash flow hedges were determined to be fully effective during the periods presented. And therefore, no amount of ineffectiveness has been included in net income. The aggregate fair value of the swaps is recorded in other assets with changes in fair value recorded in accumulated other comprehensive (loss) income, net of tax. If a hedge was deemed to be ineffective, the amount included in accumulated other comprehensive (loss) income would be reclassified into a line item within the statement of income that impacts operating results. The hedge would no longer be considered effective if a portion of the hedge becomes ineffective, the item hedged is no longer in existence or Pinnacle Financial discontinues hedge accounting. Pinnacle Financial expects the hedges to remain fully effective during the remaining terms of the swaps.