| 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 | | | $ | — | |
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| 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."
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| 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 | | | $ | — | |
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| 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.
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