Fair Value of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2019

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present the financial instruments carried at fair value on a recurring basis as of December 31, 2019 and 2018, 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)
December 31, 2019
Investment securities available-for-sale:
U.S. treasury securities	$	72,867	$	—	$	72,867	$	—
U.S. government agency securities	79,692		—		79,692		—
Mortgage-backed securities	1,463,907		—		1,463,907		—
State and municipal securities	1,714,453		—		1,698,550		15,903
Asset-backed securities	152,972		—		152,972		—
Corporate notes and other	56,104		—		56,104		—
Total investment securities available-for-sale	3,539,995		—		3,524,092		15,903
Other investments	63,291		—		25,135		38,156
Other assets	134,040		—		134,040		—
Total assets at fair value	$	3,737,326	$	—	$	3,683,267	$	54,059

Other liabilities	$	87,613	$	—	$	87,613	$	—
Total liabilities at fair value	$	87,613	$	—	$	87,613	$	—

December 31, 2018
Investment securities available-for-sale:
U.S. treasury securities	$	30,300	$	—	$	30,300	$	—
U.S. government agency securities	70,159		—		70,159		—
Mortgage-backed securities	1,310,945		—		1,310,945		—
State and municipal securities	1,229,654		—		1,215,059		14,595
Asset-backed securities	375,582		—		375,582		—
Corporate notes and other	67,046		—		67,046		—
Total investment securities available-for-sale	3,083,686		—		3,069,091		14,595
Other investments	50,791		—		24,369		26,422
Other assets	24,524		—		24,524		—
Total assets at fair value	$	3,159,001	$	—	$	3,117,984	$	41,017

Other liabilities	$	46,550	$	—	$	46,550	$	—
Total liabilities at fair value	$	46,550	$	—	$	46,550	$	—

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 December 31, 2019 and 2018 (in thousands):


December 31, 2019	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 period ended
Other real estate owned	$	29,487	$	—	$	—	$	29,487	$	(2,927)
Impaired loans, net ⁽¹⁾	32,477		—		—		32,477		(656)
Total	$	61,964	$	—	$	—	$	61,964	$	(3,583)

December 31, 2018
Other real estate owned	$	15,165	$	—	$	—	$	15,165	$	(84)
Impaired loans, net ⁽¹⁾	40,830		—		—		40,830		(1,214)
Total	$	55,995	$	—	$	—	$	55,995	$	(1,298)

⁽¹⁾Amount is net of a valuation allowance of $3.3 million and $4.0 million at December 31, 2019 and 2018, respectively, as required by ASC 310-10, "Receivables."

Rollforward of the Balance Sheet Amounts, Unobservable Input Reconciliation


	For the year ended December 31,
	2019										2018
	Available-for-sale Securities		Other investments		Other liabilities		Available-for-sale Securities		Other investments		Other liabilities
Fair value, Jan. 1	$	14,595	$	26,422	$	—	$	17,029	$	28,874	$	—
Total net realized gains (losses) included in income	116		2,785		—		(34)		2,932		—
Change in unrealized gains/losses included in other comprehensive income for assets and liabilities still held at Dec. 31	2,710		—		—		(1,232)		—		—
Purchases	—		11,297		—		—		9,013		—
Issuances	—		—		—		—		—		—
Settlements	(1,518)		(2,348)		—		(1,168)		(2,231)		—
Transfers out of Level 3	—		—		—		—		(12,166)		—
Fair value, Dec. 31	$	15,903	$	38,156	$	—	$	14,595	$	26,422	$	—
Total realized gains (losses) included in income related to financial assets and liabilities still on the consolidated balance sheet at Dec. 31	$	116	$	2,785	$	—	$	(34)	$	2,932	$	—

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 December 31, 2019 and 2018. 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.


December 31, 2019	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	$	188,996	$	201,217	$	—	$	201,217	$	—
Loans, net	19,693,099		19,717,845		—		—		19,717,845
Consumer loans held-for-sale	81,820		82,986		—		82,986		—
Commercial loans held-for-sale	17,585		17,836		—		17,836		—

Financial liabilities:
Deposits and securities sold under agreements to repurchase	20,307,382		19,647,392		—		—		19,647,392
Federal Home Loan Bank advances	2,062,534		2,078,514		—		—		2,078,514
Subordinated debt and other borrowings	749,080		712,220		—		—		712,220

Off-balance sheet instruments:
Commitments to extend credit ⁽²⁾	7,938,341		2,364		—		—		2,364
Standby letters of credit ⁽³⁾	203,579		1,422		—		—		1,422

December 31, 2018
Financial assets:
Securities held-to-maturity	$	194,282	$	193,131	$	—	$	193,131	$	—
Loans, net	17,623,974		17,288,795		—		—		17,288,795
Consumer loans held-for-sale	34,196		34,929		—		34,929		—
Commercial loans held-for-sale	15,954		16,296		—		16,296		—

Financial liabilities:
Deposits and securities sold under agreements to repurchase	18,953,848		18,337,848		—		—		18,337,848
Federal Home Loan Bank advances	1,443,589		1,432,003		—		—		1,432,003
Subordinated debt and other borrowings	485,130		464,616		—		—		464,616

Off-balance sheet instruments:
Commitments to extend credit ⁽²⁾	6,921,689		1,733		—		—		1,733
Standby letters of credit ⁽³⁾	177,475		1,131		—		—		1,131

(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 period, 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 December 31, 2019 and 2018, respectively, Pinnacle

Financial included in other liabilities $2.4 million and $1.7 million representing the inherent risks associated with these off-balance sheet commitments.

(3)At December 31, 2019 and 2018, the fair value of Pinnacle Financial's standby letters of credit totaled $1.4 million and $1.1 million, respectively. This amount represents the unamortized fee associated with these standby letters of credit, which were priced at market when issued, 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.