Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2022

Fair Value Disclosures [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, 2022 and December 31, 2021, 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)
June 30, 2022
Investment securities available-for-sale:
U.S. Treasury securities	$	246,103	$	—	$	246,103	$	—
U.S. Government agency securities	415,515		—		415,515		—
Mortgage-backed securities	1,397,678		—		1,397,678		—
State and municipal securities	1,485,387		—		1,484,731		656
Agency-backed securities	153,410		—		153,410		—
Corporate notes and other	111,245		—		111,245		—
Total investment securities available-for-sale	3,809,338		—		3,808,682		656
Other investments	144,589		—		22,978		121,611
Other assets	97,153		—		97,153		—
Total assets at fair value	$	4,051,080	$	—	$	3,928,813	$	122,267
Other liabilities	$	56,579	$	—	$	56,579	$	—
Total liabilities at fair value	$	56,579	$	—	$	56,579	$	—

	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, 2021
Investment securities available-for-sale:
U.S. Treasury securities	$	193,609	$	—	$	193,609	$	—
U.S. Government agency securities	632,009		—		632,009		—
Mortgage-backed securities	1,920,239		—		1,920,239		—
State and municipal securities	1,823,837		—		1,823,009		828
Agency-backed securities	229,569		—		229,569		—
Corporate notes and other	114,931		—		114,931		—
Total investment securities available-for-sale	4,914,194		—		4,913,366		828
Other investments	125,969		—		24,973		100,996
Other assets	57,441		—		57,441		—
Total assets at fair value	$	5,097,604	$	—	$	4,995,780	$	101,824
Other liabilities	$	80,106	$	—	$	80,106	$	—
Total liabilities at fair value	$	80,106	$	—	$	80,106	$	—

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, 2022 and December 31, 2021 (in thousands):

June 30, 2022	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)
Other real estate owned	$	8,237	$	—	$	—	$	8,237
Collateral dependent loans (1)	24,270		—		—		24,270
Total	$	32,507	$	—	$	—	$	32,507
December 31, 2021
Other real estate owned	$	8,537	$	—	$	—	$	8,537
Collateral dependent loans (1)	30,799		—		—		30,799
Total	$	39,336	$	—	$	—	$	39,336

(1) The carrying values of collateral dependent loans at June 30, 2022 and December 31, 2021 are net of valuation allowances of $1.5 million and $1.7 million, respectively.

Rollforward of the Balance Sheet Amounts, Unobservable Input Reconciliation

The table below includes a rollforward of the balance sheet amounts for the three and six months ended June 30, 2022 and 2021 (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 June 30,								For the Six months ended June 30,
	2022				2021				2022				2021
	Available-for-sale Securities		Other investments		Available-for-sale Securities		Other  investments		Available-for-sale Securities		Other investments		Available-for-sale Securities		Other investments
Fair value, beginning of period	$	662	$	106,694	$	13,513	$	62,129	$	828	$	100,996	$	15,497	$	47,759
Total realized gains included in income	1		6,669		1,256		6,957		3		8,379		1,298		10,397
Changes in unrealized gains/losses included in other comprehensive income	(7)		—		(1,293)		—		(17)		—		(3,168)		—
Purchases	—		11,352		—		13,124		—		18,763		—		25,556
Issuances	—		—		—		—		—		—		—		—
Settlements	—		(3,104)		(12,636)		(3,455)		(158)		(6,527)		(12,787)		(4,957)
Transfers out of Level 3	—		—		—		—		—		—		—		—
Fair value, end of period	$	656	$	121,611	$	840	$	78,755	$	656	$	121,611	$	840	$	78,755
Total realized gains included in income	$	1	$	6,669	$	1,256	$	6,957	$	3	$	8,379	$	1,298	$	10,397

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

The following tables present the carrying amounts, estimated fair value and placement in the fair value hierarchy of Pinnacle Financial's financial instruments at June 30, 2022 and December 31, 2021. This table excludes financial instruments for which the carrying amount approximates fair value. For short-term financial assets such as cash, cash equivalents, and restricted cash, 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):

	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)
June 30, 2022
Financial assets:
Securities purchased with agreement to resell	$	1,328,876	$	1,267,352	$	—	$	—	$	1,267,352
Securities held-to-maturity	2,744,555		2,484,358		—		2,484,358		—
Loans, net	26,060,613		25,535,858		—		—		25,535,858
Consumer loans held-for-sale	67,467		67,477		—		67,477		—
Commercial loans held-for-sale	25,901		25,905		—		25,905		—
Financial liabilities:
Deposits and securities sold under
agreements to repurchase	32,794,888		31,729,054		—		—		31,729,054
Federal Home Loan Bank advances	1,289,059		1,476,589		—		—		1,476,589
Subordinated debt and other borrowings	423,614		445,745		—		—		445,745
Off-balance sheet instruments:
Commitments to extend credit (2)	14,772,651		25,821		—		—		25,821

	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)
December 31, 2021
Financial assets:
Securities purchased with agreement to resell	$	1,000,000	$	980,543	$	—	$	—	$	980,543
Securities held-to-maturity	1,155,958		1,188,049		—		1,188,049		—
Loans, net	23,151,029		23,223,299		—		—		23,223,299
Consumer loans held-for-sale	45,806		46,288		—		46,288		—
Commercial loans held-for-sale	17,685		17,871		—		17,871		—
Financial liabilities:
Deposits and securities sold under
agreements to repurchase	31,457,092		30,812,222		—		—		30,812,222
Federal Home Loan Bank advances	888,681		1,006,866		—		—		1,006,866
Subordinated debt and other borrowings	423,172		479,879		—		—		479,879
Off-balance sheet instruments:
Commitments to extend credit (2)	13,063,942		24,351		—		—		24,351

(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, including both commitments for unfunded loans and standby letters of credit. In making this evaluation, Pinnacle Financial utilizes credit loss expectations on funded loans from our allowance for credit losses methodology and evaluates the probability that the outstanding commitment will eventually become a funded loan. As a result, at June 30, 2022 and December 31, 2021, Pinnacle Financial included in other liabilities $24.0 million and $22.5 million, respectively, representing expected credit losses on off-balance sheet commitments, which are reflected in the estimated fair values of the related commitments. Also included in the fair values at June 30, 2022 and December 31, 2021 are unamortized fees related to these commitments of $1.9 million.