Note 11. Variable Interest Entities

Under ASC 810, Pinnacle Financial is deemed to be the primary beneficiary and required to consolidate a VIE if it has a variable interest in the VIE that provides it with a controlling financial interest. For such purposes, the determination of whether a controlling financial interest exists is based on whether a single party has both the power to direct the activities of the VIE that most significantly impact the VIE's economic performance and the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. ASC 810, requires continual reconsideration of conclusions reached regarding which interest holder is a VIE's primary beneficiary and disclosures surrounding those VIE's which have not been consolidated. The consolidation methodology provided in this footnote for the quarter ended September 30, 2011, and the year ended December 31, 2010 has been prepared in accordance with ASC 810.

At September 30, 2011, Pinnacle Financial did not have any consolidated variable interest entities to disclose but did have several nonconsolidated VIEs. As discussed more fully in form 10-K, Pinnacle Financial has the following non-consolidated variable interest entities: low income housing partnerships, trust preferred issuances, accrued restructuring commercial loans, and managed discretionary trusts.

The following table summarizes VIE's that are not consolidated by Pinnacle Financial as of September 30, 2011 and December 31, 2010 (in thousands):

September 30, 2011

December 31, 2010

Type

Maximum

Loss

Exposure

Liability

Recognized

Maximum

Loss

Exposure

Liability

Recognized

Balance Sheet

Classification

Low Income Housing Partnerships

3,958

4,095

Other Assets

Trust Preferred Issuances

N/A

82,476

N/A

82,476

Subordinated Debt

Commercial Troubled Debt Restructurings

15,033

19,907

Loans

Managed Discretionary Trusts

N/A