Derivative Instruments

12 Months Ended

Dec. 31, 2012

Derivative Instruments [Abstract]

Derivative Instruments

Note 15.  Derivative Instruments

Financial derivatives are reported at fair value in other assets or other liabilities.  The accounting for changes in the fair value of a derivative depends on whether it has been designated and qualifies as part of a hedging relationship.  For derivatives not designated as hedges, the gain or lossis recognized in current earnings.

Beginning in 2007, Pinnacle Financial entered into interest rate swaps (swaps) to facilitate customer transactions and meet their financing needs.  Upon entering into these instruments to meet customer needs, Pinnacle Financial enters into offsetting positions in order to minimize the risk.  These swaps qualify as derivatives, but are not designated as hedging instruments. All of the derivatives held at December 31, 2012 and 2011 related to these customer swaps.

Interest rate swap contracts involve the risk of dealing with counterparties and their ability to meet contractual terms.  As such, Pinnacle Financial has recorded a credit valuation adjustment for counter-party credit risk.  When the fair value of a derivative instrument contract is positive, this generally indicates that the counter party or customer owes Pinnacle Financial, and results in credit risk to Pinnacle Financial.  When the fair value of a derivative instrument contract is negative, Pinnacle Financial owes the customer or counterparty and therefore, Pinnacle Financial has no credit risk.

A summary of Pinnacle Financial's interest rate swaps as of December 31, 2012 is included in the following table (in thousands):

	At December 31, 2012					At December 31, 2011
	Notional Amount		Estimated Fair Value			Notional Amount		Estimated Fair Value
Interest rate swap agreements:
Pay fixed / receive variable swaps	$	236,377	$	16,132		$	257,639	$	17,937
Pay variable / receive fixed swaps		236,377		(16,366	)		257,639		(18,147	)
Total	$	472,754	$	(234	)	$	515,278	$	(210	)