Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2024

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 September 30, 2024 and December 31, 2023, 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)
September 30, 2024
Investment securities available-for-sale:
U.S. Treasury securities	$	1,431,557	$	—	$	1,431,557	$	—
U.S. Government agency securities	220,803		—		220,803		—
Mortgage-backed securities	1,654,357		—		1,654,357		—
State and municipal securities	1,496,432		—		1,496,096		336
Agency-backed securities	128,612		—		128,612		—
Corporate notes and other	459,227		—		446,351		12,876
Total investment securities available-for-sale	5,390,988		—		5,377,776		13,212
Other investments	193,110		—		22,854		170,256
Mortgage servicing rights	10,958		—		—		10,958
Other assets	152,604		—		152,604		—
Total assets at fair value	$	5,747,660	$	—	$	5,553,234	$	194,426

Other liabilities	$	65,635	$	—	$	65,635	$	—
Total liabilities at fair value	$	65,635	$	—	$	65,635	$	—

December 31, 2023
Investment securities available-for-sale:
U.S. Treasury securities	$	893,412	$	—	$	893,412	$	—
U.S. Government agency securities	262,730		—		262,730		—
Mortgage-backed securities	947,390		—		947,390		—
State and municipal securities	1,585,895		—		1,585,416		479
Agency-backed securities	191,635		—		191,635		—
Corporate notes and other	436,468		—		436,468		—
Total investment securities available-for-sale	4,317,530		—		4,317,051		479
Other investments	179,487		—		22,347		157,140
Other assets	197,541		—		197,541		—
Total assets at fair value	$	4,694,558	$	—	$	4,536,939	$	157,619

Other liabilities	$	79,068	$	—	$	79,068	$	—
Total liabilities at fair value	$	79,068	$	—	$	79,068	$	—

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 September 30, 2024 and December 31, 2023 (in thousands):


September 30, 2024	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	$	750	$	—	$	—	$	750

Collateral dependent loans (1)	81,451		—		—		81,451
Total	$	82,201	$	—	$	—	$	82,201

December 31, 2023
Other real estate owned	$	3,937	$	—	$	—	$	3,937
Collateral dependent loans (1)	52,167		—		—		52,167
Total	$	56,104	$	—	$	—	$	56,104

(1) The carrying values of collateral dependent loans at September 30, 2024 and December 31, 2023 are net of valuation allowances of $43.8 million and $18.6 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 nine months ended September 30, 2024 and 2023 (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 September 30,											For the Nine months ended September 30,
	2024						2023					2024		2023
	AFS securities		Other investments		MSRs			AFS securities		Other investments			AFS securities	Other investments	MSRs	AFS securities	Other investments
Fair value, beginning of period	$	13,197	$	168,312	$	11,301		$	479	$	151,762		$479	$157,140	$—	$629	$130,982
Total realized gains (losses) included in income	13		2,414		(343)			1		(77)			39	1,879	10,958	3	3,597
Changes in unrealized gains/losses included in other comprehensive income (loss)	2		—		—			(9)		—			18	—	—	(2)	—
Transfers into Level 3	—		—		—			—		—			12,841	—	—	—	—
Purchases	—		5,608		—			—		8,015			—	22,910	—	—	27,947
Issuances	—		—		—			—		—			—	—	—	—	—
Settlements	—		(6,078)		—			—		(3,037)			(165)	(11,673)	—	(159)	(5,863)
Transfers out of Level 3	—		—		—			—		—			—	—	—	—	—
Fair value, end of period	$	13,212	$	170,256	$	10,958		$	471	$	156,663		$13,212	$170,256	$10,958	$471	$156,663
Total realized gains (losses) included in income	$	13	$	2,414	$	(343)		$	1	$	(77)		$39	$1,879	$10,958	$3	$3,597

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 September 30, 2024 and December 31, 2023. 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 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)
September 30, 2024
Financial assets:
Securities purchased with agreement to resell	$	66,480	$	66,483	$	—	$	—	$	66,483
Securities held-to-maturity	2,902,253		2,713,901		—		2,713,901		—
Loans, net	33,916,776		33,484,235		—		—		33,484,235
Consumer loans held-for-sale	178,600		179,257		—		179,257		—
Commercial loans held-for-sale	8,617		8,649		—		8,649		—

Financial liabilities:
Deposits and securities sold under
agreements to repurchase	41,164,844		40,320,965		—		—		40,320,965
Federal Home Loan Bank advances	2,146,395		2,187,199		—		—		2,187,199
Subordinated debt and other borrowings	425,600		430,367		—		—		430,367

December 31, 2023
Financial assets:
Securities purchased with agreement to resell	$	558,009	$	461,375	$	—	$	—	$	461,375
Securities held-to-maturity	3,006,357		2,775,184		—		2,775,184		—
Loans, net	32,323,036		31,863,583		—		—		31,863,583
Consumer loans held-for-sale	104,217		104,626		—		104,626		—
Commercial loans held-for-sale	9,280		9,316		—		9,316		—

Financial liabilities:
Deposits and securities sold under
agreements to repurchase	38,749,299		37,954,938		—		—		37,954,938
Federal Home Loan Bank advances	2,138,169		2,166,912		—		—		2,166,912
Subordinated debt and other borrowings	424,938		462,399		—		—		462,399

(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.

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

+ References + Details