Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2017

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 March 31, 2017 and December 31, 2016, by caption on the consolidated balance sheets and by FASB ASC 820 valuation hierarchy (as described above) (in thousands):

March 31, 2017	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	$	250	$	-	$	250	$	-
U.S. government agency securities		18,939		-		18,939		-
Mortgage-backed agency securities		1,226,977		-		1,226,977		-
State and municipal securities		248,997		-		248,997		-
Agency-backed securities		71,321		-		71,321		-
Corporate notes and other		13,292		-		13,292		-
Total investment securities available-for-sale	$	1,579,776	$	-	$	1,579,776	$	-
Other investments		10,492		-		-		10,492
Other assets		14,662		-		14,662		-
Total assets at fair value	$	1,604,930	$	-	$	1,594,438	$	10,492

Other liabilities	$	15,404	$	-	$	15,404	$	-
Total liabilities at fair value	$	15,404	$	-	$	15,404	$	-

December 31, 2016
Investment securities available-for-sale:
U.S. treasury securities	$	250	$	-	$	250	$	-
U.S. government agency securities		21,769		-		21,769		-
Mortgage-backed agency securities		976,626		-		976,626		-
State and municipal securities		212,720		-		212,720		-
Agency-backed securities		78,580		-		78,580		-
Corporate notes and other		8,601		-		8,601		-
Total investment securities available-for-sale		1,298,546		-		1,298,546		-
Other investments		10,478		-		-		10,478
Other assets		13,340		-		13,340		-
Total assets at fair value	$	1,322,364	$	-	$	1,311,886	$	10,478

Other liabilities	$	15,758	$	-	$	15,758	$	-
Total liabilities at fair value	$	15,758	$	-	$	15,758	$	-

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, 2017 and December 31, 2016 (in thousands):

March 31, 2017	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	$	6,235	$	-	$	-	$	6,235	$	(78	)
Nonaccrual loans, net⁽¹⁾		23,198		-		-		23,198		(1,773	)
Total	$	29,433	$	-	$	-	$	29,433	$	(1,851	)

December 31, 2016
Other real estate owned	$	6,090	$	-	$	-	$	6,090	$	(135	)
Nonaccrual loans, net⁽¹⁾		26,506		-		-		26,506		(7,173	)
Total	$	32,596	$	-	$	-	$	32,596	$	(7,308	)

⁽¹⁾ Amount is net of valuation allowance of $1.9 million and $1.1 million at March 31, 2017 and December 31, 2016, respectively, as required by ASC 310-10, "Receivables."

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, 2017 (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,
	2017					2016
	Other assets			Other liabilities		Other assets			Other liabilities
Fair value, beginning of period	$	10,478		$	-	$	9,764		$	-
Total realized gains included in income		197			-		177			-
Changes in unrealized gains/losses included in other comprehensive income for assets and liabiliaties still held at March 31		-			-		-			-
Purchases		120			-		325			-
Issuances		-			-		-			-
Settlements		(303	)		-		(138	)		-
Transfers out of Level 3		-			-		-			-
Fair value, end of period		10,492			-		10,128			-
Total realized gains included in income related to financial assets and liabilities still on the consolidated balance sheet at March 31	$	197		$	-	$	177			-

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 March 31, 2017 and December 31, 2016. 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) March 31, 2017		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	$	24,998	$	25,036	$	-	$	25,036	$	-
Loans, net		8,583,683		8,361,595		-		-		8,361,595
Mortgage loans held-for-sale		70,598		71,799		-		71,799		-
Loans held-for-sale		15,354		15,611		-		15,611		-

Financial liabilities:
Deposits and securities sold under
agreements to repurchase		9,351,754		9,071,202		-		-		9,071,202
Federal Home Loan Bank advances		181,264		181,564		-		-		181,564
Subordinated debt and other borrowings		350,849		330,418		-		-		330,418
Federal funds purchased		50,000		50,000		-		-		-

Off-balance sheet instruments:
Commitments to extend credit ⁽²⁾		3,338,086		347		-		-		347
Standby letters of credit ⁽³⁾		128,449		731		-		-		731

December 31, 2016
Financial assets:
Securities held-to-maturity	$	25,251	$	25,233	$	-	$	25,233	$	-
Loans, net		8,390,944		8,178,982		-		-		8,178,982
Mortgage loans held for sale		47,710		47,892		-		47,892		-
Loans held-for-sale		22,588		22,674		-		22,674		-

Financial liabilities:
Deposits and securities sold under
agreements to repurchase		8,845,014		8,579,664		-		-		8,579,664
Federal Home Loan Bank advances		406,304		406,491		-		-		406,491
Subordinated debt and other borrowings		350,768		328,049		-		-		328,049

Off-balance sheet instruments:
Commitments to extend credit ⁽²⁾		3,374,269		383		-		-		383
Standby letters of credit ⁽³⁾		131,418		740		-		-		740

(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 March 31, 2017 and December 31, 2016, Pinnacle Financial included in other liabilities $347,000 and $383,000, respectively, representing the inherent risks associated with these off-balance sheet commitments.

(3)

At March 31, 2017 and December 31, 2016, the fair value of Pinnacle Financial's standby letters of credit was $731,000 and $740,000, 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.