Loans and Allowance for Loan Losses | 3 Months Ended |
Mar. 31, 2014 |
Loans and Allowance for Loan Losses [Abstract] | ' |
Loans and Allowance for Loan Losses | ' |
Note 3. Loans and Allowance for Loan Losses |
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For financial reporting purposes, Pinnacle Financial classifies its loan portfolio based on the underlying collateral utilized to secure each loan. This classification is consistent with those utilized in the Quarterly Report of Condition and Income filed with the Federal Deposit Insurance Corporation (FDIC). |
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Commercial loans receive risk ratings by the assigned financial advisor subject to validation by Pinnacle Financial's independent loan review department. Risk ratings are categorized as pass, special mention, substandard, substandard-nonaccrual or doubtful-nonaccrual. Pinnacle Financial believes that its categories follow those used by Pinnacle Bank's primary regulators. At March 31, 2014, approximately 74% of our loan portfolio was analyzed as a commercial loan type with a specifically assigned risk rating in the allowance for loan loss assessment. Consumer loans and small business loans are generally not assigned an individual risk rating but are evaluated as either accrual or nonaccrual based on the performance of the individual loans. However, certain consumer real estate-mortgage loans and certain consumer and other loans receive a specific risk rating due to the loan proceeds being used for commercial purposes even though the collateral may be of a consumer loan nature. |
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Risk ratings are subject to continual review by the loan officer. At least annually, our credit procedures require that every risk rated loan of $250,000 or more be subject to a formal credit risk review process. Each loan's risk rating is also subject to review by our independent loan review department, which reviews a substantial portion of our risk rated portfolio annually. Included in the coverage are independent loan reviews of loans in targeted higher-risk portfolio segments. |
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The following table presents our loan balances by primary loan classification and the amount within each risk rating category. Pass rated loans include all credits other than those included in special mention, substandard, substandard-nonaccrual and doubtful-nonaccrual which are defined as follows: |
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 | Special mention loans have potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in Pinnacle Financial's credit position at some future date. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
 | Substandard loans are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize collection of the debt. Substandard loans are characterized by the distinct possibility that Pinnacle Financial will sustain some loss if the deficiencies are not corrected. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
ï‚· | Substandard-nonaccrual loans are substandard loans that have been placed on nonaccrual status. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
ï‚· | Doubtful-nonaccrual loans have all the characteristics of substandard-nonaccrual loans with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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The following table outlines the amount of each loan classification categorized into each risk rating category as of March 31, 2014 and December 31, 2013 (in thousands): |
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| | Commercial real estate - mortgage | | | Consumer real estate - mortgage | | | Construction and land development | | | Commercial and industrial | | | Consumer | | | Total | | | | | | | | | |
and other | | | | | | | | |
31-Mar-14 | | | | | | | | | | | | | | | | | | | | | | | | | | |
Accruing loans | | | | | | | | | | | | | | | | | | | | | | | | | | |
        Pass | | $ | 1,410,425 | | | $ | 676,486 | | | $ | 252,406 | | | $ | 1,515,110 | | | $ | 158,088 | | | $ | 4,012,515 | | | | | | | | | |
        Special Mention | | | 7,997 | | | | 3,557 | | | | 30,083 | | | | 12,814 | | | | 149 | | | | 54,600 | | | | | | | | | |
        Substandard (1) | | | 22,726 | | | | 13,900 | | | | 10,465 | | | | 36,614 | | | | 154 | | | | 83,859 | | | | | | | | | |
        Total | | | 1,441,148 | | | | 693,943 | | | | 292,954 | | | | 1,564,538 | | | | 158,391 | | | | 4,150,974 | | | | | | | | | |
Impaired loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
        Nonaccrual loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
                Substandard-nonaccrual | | | 7,145 | | | | 5,679 | | | | 990 | | | | 1,538 | | | | 254 | | | | 15,606 | | | | | | | | | |
                Doubtful-nonaccrual | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | | | | |
        Total nonaccrual loans | | | 7,145 | | | | 5,679 | | | | 990 | | | | 1,538 | | | | 254 | | | | 15,606 | | | | | | | | | |
        Troubled debt restructurings(2) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
                Pass | | | 143 | | | | 1,657 | | | | 111 | | | | 277 | | | | 286 | | | | 2,474 | | | | | | | | | |
                Special Mention | | | 7,736 | | | | 2,313 | | | | - | | | | 2,584 | | | | - | | | | 12,633 | | | | | | | | | |
                Substandard | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | | | | |
         Total troubled debt restructurings | | | 7,879 | | | | 3,970 | | | | 111 | | | | 2,861 | | | | 286 | | | | 15,107 | | | | | | | | | |
Total impaired loans | | | 15,024 | | | | 9,649 | | | | 1,101 | | | | 4,399 | | | | 540 | | | | 30,713 | | | | | | | | | |
Total loans | | $ | 1,456,172 | | | $ | 703,592 | | | $ | 294,055 | | | $ | 1,568,937 | | | $ | 158,931 | | | $ | 4,181,687 | | | | | | | | | |
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| | Commercial real estate - mortgage | | | Consumer real estate - mortgage | | | Construction and land development | | | Commercial and industrial | | | Consumer | | | Total | | | | | | | | | |
and other | | | | | | | | |
31-Dec-13 | | | | | | | | | | | | | | | | | | | | | | | | | | |
Accruing loans | | | | | | | | | | | | | | | | | | | | | | | | | | |
        Pass | | $ | 1,332,387 | | | $ | 670,412 | | | $ | 275,876 | | | $ | 1,557,923 | | | $ | 143,032 | | | $ | 3,979,630 | | | | | | | | | |
        Special Mention | | | 8,282 | | | | 1,824 | | | | 31,835 | | | | 20,065 | | | | - | | | | 62,006 | | | | | | | | | |
        Substandard (1) | | | 20,296 | | | | 14,107 | | | | 7,297 | | | | 23,174 | | | | 154 | | | | 65,028 | | | | | | | | | |
        Total | | | 1,360,965 | | | | 686,343 | | | | 315,008 | | | | 1,601,162 | | | | 143,186 | | | | 4,106,664 | | | | | | | | | |
Impaired loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
        Nonaccrual loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
                Substandard-nonaccrual | | | 9,017 | | | | 5,289 | | | | 1,070 | | | | 2,565 | | | | 242 | | | | 18,183 | | | | | | | | | |
                Doubtful-nonaccrual | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | | | | |
        Total nonaccrual loans | | | 9,017 | | | | 5,289 | | | | 1,070 | | | | 2,565 | | | | 242 | | | | 18,183 | | | | | | | | | |
        Troubled debt restructurings(2) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
                Pass | | | 2,564 | | | | 1,666 | | | | 113 | | | | 320 | | | | 276 | | | | 4,939 | | | | | | | | | |
                Special Mention | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | | | | |
                Substandard | | | 10,889 | | | | 2,318 | | | | - | | | | 1,500 | | | | - | | | | 14,707 | | | | | | | | | |
         Total troubled debt restructurings | | | 13,453 | | | | 3,984 | | | | 113 | | | | 1,820 | | | | 276 | | | | 19,646 | | | | | | | | | |
Total impaired loans | | | 22,470 | | | | 9,273 | | | | 1,183 | | | | 4,385 | | | | 518 | | | | 37,829 | | | | | | | | | |
Total loans | | $ | 1,383,435 | | | $ | 695,616 | | | $ | 316,191 | | | $ | 1,605,547 | | | $ | 143,704 | | | $ | 4,144,493 | | | | | | | | | |
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-1 | Potential problem loans represent those loans with a well-defined weakness and where information about possible credit problems of borrowers has caused management to have doubts about the borrower's ability to comply with present repayment terms. This definition is believed to be substantially consistent with the standards established by Pinnacle Bank's primary regulators for loans classified as substandard, excluding the impact of substandard nonaccrual loans and substandard troubled debt restructurings. Potential problem loans, which are not included in nonaccrual loans, amounted to approximately $83.9 million at March 31, 2014, compared to $65.0 million at December 31, 2013. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
-2 | Troubled debt restructurings are presented as an impaired loan; however, they continue to accrue interest at contractual rates. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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At March 31, 2014 and December 31, 2013, all loans classified as nonaccrual were deemed to be impaired. The principal balances of these nonaccrual loans amounted to $15.6 million and $18.2 million at March 31, 2014 and December 31, 2013, respectively, and are included in the tables above. For the three months ended March 31, 2014, the average balance of nonaccrual loans was $16.1 million as compared to $21.5 million for the twelve months ended December 31, 2013. At the date such loans were placed on nonaccrual status, Pinnacle Financial reversed all previously accrued interest income against current year earnings. Had these nonaccrual loans been on accruing status, interest income would have been higher by $283,000 for the three months ended March 31, 2014 and by $292,000 for the three months ended March 31, 2013. |
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The following table details the recorded investment, unpaid principal balance and related allowance and average recorded investment of our nonaccrual loans at March 31, 2014 and December 31, 2013 by loan classification and the amount of interest income recognized on a cash basis throughout the fiscal year-to-date period then ended, respectively, on these loans that remain on the balance sheets (in thousands): |
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| | At March 31, 2014 | | | Three Months Ended | | | | | | | | | | | | | |
31-Mar-14 | | | | | | | | | | | | |
| | Recorded investment | | | Unpaid principal balance | | | Related allowance(1) | | | Average recorded investment | | | Interest income recognized | | | | | | | | | | | | | |
Collateral dependent nonaccrual loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | |
    Commercial real estate – mortgage | | $ | 5,192 | | | $ | 5,712 | | | $ | - | | | $ | 5,225 | | | $ | - | | | | | | | | | | | | | |
    Consumer real estate – mortgage | | | 2,413 | | | | 2,476 | | | | - | | | | 2,427 | | | | - | | | | | | | | | | | | | |
    Construction and land development | | | 545 | | | | 545 | | | | - | | | | 545 | | | | - | | | | | | | | | | | | | |
    Commercial and industrial | | | 1,060 | | | | 1,168 | | | | - | | | | 1,074 | | | | - | | | | | | | | | | | | | |
    Consumer and other | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | | | | | | | | |
Total | | $ | 9,210 | | | $ | 9,901 | | | $ | - | | | $ | 9,271 | | | $ | - | | | | | | | | | | | | | |
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Cash flow dependent nonaccrual loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
    Commercial real estate – mortgage | | $ | 1,953 | | | $ | 2,152 | | | $ | 161 | | | $ | 1,964 | | | $ | - | | | | | | | | | | | | | |
    Consumer real estate – mortgage | | | 3,266 | | | | 3,514 | | | | 875 | | | | 3,289 | | | | - | | | | | | | | | | | | | |
    Construction and land development | | | 445 | | | | 516 | | | | 14 | | | | 450 | | | | - | | | | | | | | | | | | | |
    Commercial and industrial | | | 478 | | | | 658 | | | | 162 | | | | 879 | | | | - | | | | | | | | | | | | | |
    Consumer and other | | | 254 | | | | 270 | | | | 86 | | | | 260 | | | | - | | | | | | | | | | | | | |
Total | | $ | 6,396 | | | $ | 7,110 | | | $ | 1,298 | | | $ | 6,842 | | | $ | - | | | | | | | | | | | | | |
Total nonaccrual loans | | $ | 15,606 | | | $ | 17,011 | | | $ | 1,298 | | | $ | 16,113 | | | $ | - | | | | | | | | | | | | | |
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| | At December 31, 2013: | | | For the year ended | | | | | | | | | | | | | |
31-Dec-13 | | | | | | | | | | | | |
| | Recorded investment | | | Unpaid principal balance | | | Related allowance(1) | | | Average recorded investment | | | Interest income recognized | | | | | | | | | | | | | |
Collateral dependent nonaccrual loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | |
    Commercial real estate – mortgage | | $ | 7,035 | | | $ | 7,481 | | | $ | - | | | $ | 6,522 | | | $ | - | | | | | | | | | | | | | |
    Consumer real estate – mortgage | | | 2,162 | | | | 2,209 | | | | - | | | | 2,234 | | | | - | | | | | | | | | | | | | |
    Construction and land development | | | 545 | | | | 545 | | | | - | | | | 938 | | | | - | | | | | | | | | | | | | |
    Commercial and industrial | | | 1,828 | | | | 1,901 | | | | - | | | | 3,911 | | | | - | | | | | | | | | | | | | |
    Consumer and other | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | | | | | | | | |
Total | | $ | 11,570 | | | $ | 12,136 | | | $ | - | | | $ | 13,605 | | | $ | - | | | | | | | | | | | | | |
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Cash flow dependent nonaccrual loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
    Commercial real estate – mortgage | | $ | 1,982 | | | $ | 2,166 | | | $ | 142 | | | $ | 2,448 | | | $ | - | | | | | | | | | | | | | |
    Consumer real estate – mortgage | | | 3,127 | | | | 3,334 | | | | 722 | | | | 3,405 | | | | - | | | | | | | | | | | | | |
    Construction and land development | | | 525 | | | | 609 | | | | 33 | | | | 568 | | | | - | | | | | | | | | | | | | |
    Commercial and industrial | | | 737 | | | | 1,029 | | | | 218 | | | | 1,216 | | | | - | | | | | | | | | | | | | |
    Consumer and other | | | 242 | | | | 252 | | | | 72 | | | | 242 | | | | - | | | | | | | | | | | | | |
Total | | $ | 6,613 | | | $ | 7,390 | | | $ | 1,187 | | | $ | 7,879 | | | $ | - | | | | | | | | | | | | | |
Total nonaccrual loans | | $ | 18,183 | | | $ | 19,526 | | | $ | 1,187 | | | $ | 21,484 | | | $ | - | | | | | | | | | | | | | |
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(1)Â Â Â Â | Collateral dependent loans are typically charged-off to their net realizable value pursuant to requirements of our primary regulators and no specific allowance is carried related to those loans. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Pinnacle Financial's policy is that once a loan is placed on nonaccrual status each subsequent payment is reviewed on a case-by-case basis to determine if the payment should be applied to interest or principal pursuant to regulatory guidelines. Pinnacle Financial recognized no interest income from cash payments received on nonaccrual loans during the three months ended March 31, 2014 or during the year ended December 31, 2013. |
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Impaired loans also include loans that Pinnacle Bank has elected to formally restructure when, due to the weakening credit status of a borrower, the restructuring may facilitate a repayment plan that seeks to minimize the potential losses that Pinnacle Bank may otherwise incur. If on nonaccrual status as of the date of restructuring, the loans are included in nonaccrual loans. Loans that have been restructured that were performing as of the restructure date and continue to perform in accordance with the restructured terms are reported separately as troubled debt restructurings. |
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At March 31, 2014 and December 31, 2013, there were $15.1 million and $19.6 million, respectively, of troubled debt restructurings that were performing as of their restructure date and which were accruing interest. These troubled debt restructurings are considered impaired loans pursuant to U.S. GAAP. Troubled commercial loans are restructured by specialists within our Special Assets Group, and all restructurings are approved by committees and credit officers separate and apart from the normal loan approval process. These specialists are charged with reducing Pinnacle Financial's overall risk and exposure to loss in the event of a restructuring by obtaining some or all of the following: improved documentation, additional guaranties, increase in curtailments, reduction in collateral release terms, additional collateral or other similar strategies. |
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The following table outlines the amount of each troubled debt restructuring categorized by loan classification made during the three months ended March 31, 2014 and 2013 (dollars in thousands): |
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| | Three months ended March 31, 2014 | | | Three months ended March 31, 2013 | | | | | | | | | |
| | Number | | | Pre | | | Post Modification Outstanding Recorded Investment, net of related allowance | | | Number of contracts | | | Pre | | | Post | | | | | | | | | |
of contracts | Modification Outstanding Recorded Investment | Modification Outstanding Recorded Investment | Modification Outstanding Recorded Investment, net of related allowance | | | | | | | | |
Commercial real estate – mortgage | | | - | | | $ | - | | | $ | - | | | | - | | | $ | - | | | $ | - | | | | | | | | | |
Consumer real estate – mortgage | | | - | | | | - | | | | - | | | | 1 | | | | 432 | | | | 359 | | | | | | | | | |
Construction and land development | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | | | | |
Commercial and industrial | | | 6 | | | | 2,584 | | | | 565 | | | | - | | | | - | | | | - | | | | | | | | | |
Consumer and other | | | - | | | | - | | | | - | | | | 1 | | | | 200 | | | | 170 | | | | | | | | | |
| | | 6 | | | $ | 2,584 | | | $ | 565 | | | | 2 | | | $ | 632 | | | $ | 529 | | | | | | | | | |
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During the three months ended March 31, 2014, Pinnacle Financial did not have any troubled debt restructurings that subsequently defaulted within twelve months of the restructuring. During the three months ended March 31, 2013, two consumer real estate loans totaling $1.0 million which were previously classified as a troubled debt restructuring subsequently defaulted, within twelve months of the restructuring. A default of a troubled debt restructuring is defined as an occurrence which violates the terms of the receivable's contract. |
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Pinnacle Financial analyzes its commercial loan portfolio to determine if a concentration of credit risk exists to any industry. Pinnacle Financial utilizes broadly accepted industry classification systems in order to classify borrowers into various industry classifications. Pinnacle Financial has a credit exposure (loans outstanding plus unfunded lines of credit) exceeding 25 % of Pinnacle Bank's total risk-based capital to borrowers in the following industries at March 31, 2014 with the comparative exposures for December 31, 2013 (in thousands): |
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| At March 31, 2014: | | | | | | | | | | | | | | | | | | | |
| Outstanding Principal Balances | | Unfunded Commitments | | Total exposure | | Total Exposure at December 31, 2013 | | | | | | | | | | | | | | | | | |
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Lessors of nonresidential buildings | | $ | 501,891 | | | $ | 53,584 | | | $ | 555,475 | | | $ | 515,240 | | | | | | | | | | | | | | | | | |
Lessors of residential buildings | | | 240,296 | | | | 27,544 | | | | 267,840 | | | | 270,773 | | | | | | | | | | | | | | | | | |
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The table below presents past due balances at March 31, 2014 and December 31, 2013, by loan classification and segment allocated between accruing and nonaccrual status (in thousands): |
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31-Mar-14 | | 30-89 days past due and accruing | | | 90 days or more past due and accruing | | | Total past due and accruing | | | Nonaccrual(1) | | | Current | | | Total | | | | | | | | | |
and accruing | Loans | | | | | | | | |
Commercial real estate: | | | | | | | | | | | | | | | | | | | | | | | | | | |
    Owner-occupied | | $ | 125 | | | $ | - | | | $ | 125 | | | $ | 6,906 | | | $ | 694,296 | | | $ | 701,327 | | | | | | | | | |
    All other | | | 844 | | | | 7,736 | (2) | | | 8,580 | | | | 239 | | | | 746,026 | | | | 754,845 | | | | | | | | | |
Consumer real estate – mortgage | | | 5,239 | | | | - | | | | 5,239 | | | | 5,679 | | | | 692,674 | | | | 703,592 | | | | | | | | | |
Construction and land development | | | 849 | | | | 147 | | | | 996 | | | | 990 | | | | 292,069 | | | | 294,055 | | | | | | | | | |
Commercial and industrial | | | 1,191 | | | | 52 | | | | 1,243 | | | | 1,538 | | | | 1,566,156 | | | | 1,568,937 | | | | | | | | | |
Consumer and other | | | 2,096 | | | | 8 | | | | 2,104 | | | | 254 | | | | 156,573 | | | | 158,931 | | | | | | | | | |
| | $ | 10,344 | | | $ | 7,943 | | | $ | 18,287 | | | $ | 15,606 | | | $ | 4,147,794 | | | $ | 4,181,687 | | | | | | | | | |
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31-Dec-13 | | 30-89 days past due and accruing | | | 90 days or more past due and accruing | | | Total past due and accruing | | | Nonaccrual(1) | | | Current | | | Total | | | | | | | | | |
and accruing | Loans | | | | | | | | |
Commercial real estate: | | | | | | | | | | | | | | | | | | | | | | | | | | |
    Owner-occupied | | $ | 2,534 | | | $ | - | | | $ | 2,534 | | | $ | 7,750 | | | $ | 669,014 | | | $ | 679,298 | | | | | | | | | |
    All other | | | 27 | | | | 2,232 | | | | 2,259 | | | | 1,267 | | | | 700,611 | | | | 704,137 | | | | | | | | | |
Consumer real estate – mortgage | | | 2,215 | | | | - | | | | 2,215 | | | | 5,289 | | | | 688,112 | | | | 695,616 | | | | | | | | | |
Construction and land development | | | 4,839 | | | | - | | | | 4,839 | | | | 1,070 | | | | 310,282 | | | | 316,191 | | | | | | | | | |
Commercial and industrial | | | 1,847 | | | | 825 | | | | 2,672 | | | | 2,565 | | | | 1,600,310 | | | | 1,605,547 | | | | | | | | | |
Consumer and other | | | 1,488 | | | | 289 | | | | 1,777 | | | | 242 | | | | 141,685 | | | | 143,704 | | | | | | | | | |
| | $ | 12,950 | | | $ | 3,346 | | | $ | 16,296 | | | $ | 18,183 | | | $ | 4,110,014 | | | $ | 4,144,493 | | | | | | | | | |
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(1) Approximately $10.9Â million of nonaccrual loans as of March 31, 2014 and December 31, 2013, respectively, were currently performing pursuant to their contractual terms. |
(2) Represents one commercial real estate loan which, subsequent to March 31, 2014, was brought current with a principal curtailment of $7.6 million. |
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The following table shows the allowance allocation by loan classification and accrual status at March 31, 2014 and December 31, 2013 (in thousands): |
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| | | | | Impaired Loans | | | | |
| | Accruing Loans | | | Nonaccrual Loans | | | Troubled Debt Restructurings(1) | | | Total Allowance | |
for Loan Losses |
| | 31-Mar-14 | | | 31-Dec-13 | | | 31-Mar-14 | | | 31-Dec-13 | | | 31-Mar-14 | | | 31-Dec-13 | | | 31-Mar-14 | | | 31-Dec-13 | |
Commercial real estate –mortgage | | $ | 19,636 | | | $ | 19,298 | | | $ | 161 | | | $ | 142 | | | $ | 753 | | | $ | 1,932 | | | $ | 20,550 | | | $ | 21,372 | |
Consumer real estate – mortgage | | | 6,426 | | | | 7,090 | | | | 875 | | | | 722 | | | | 521 | | | | 543 | | | | 7,822 | | | | 8,355 | |
Construction and land development | | | 6,737 | | | | 7,186 | | | | 14 | | | | 33 | | | | 14 | | | | 16 | | | | 6,765 | | | | 7,235 | |
Commercial and industrial | | | 25,951 | | | | 24,660 | | | | 162 | | | | 218 | | | | 597 | | | | 256 | | | | 26,710 | | | | 25,134 | |
Consumer and other | | | 1,764 | | | | 1,521 | | | | 86 | | | | 72 | | | | 36 | | | | 39 | | | | 1,886 | | | | 1,632 | |
Unallocated | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 3,791 | | | | 4,242 | |
| | $ | 60,514 | | | $ | 59,755 | | | $ | 1,298 | | | $ | 1,187 | | | $ | 1,921 | | | $ | 2,786 | | | $ | 67,524 | | | $ | 67,970 | |
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(1)Â Â Â Â | Troubled debt restructurings of $15.1 million and $19.6 million as of March 31, 2014 and December 31, 2013, respectively, are classified as impaired loans pursuant to U.S. GAAP; however, these loans continue to accrue interest at contractual rates. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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The following table details the changes in the allowance for loan losses from December 31, 2012 to December 31, 2013 to March 31, 2014 by loan classification and the allocation of the allowance for loan losses (in thousands): |
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| Commercial | | Consumer | | Construction and | | Commercial and industrial | | Consumer and other | | Unallocated | | Total | | | | | | | | | | | | |
real estate – |  real estate – mortgage | land development | | | | | | | | | | | |
mortgage | | | | | | | | | | | | | |
Allowance for Loan Losses: | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2012 | $ | 19,634 | | $ | 8,762 | | $ | 9,164 | | $ | 24,738 | | $ | 1,094 | | $ | 6,025 | | $ | 69,417 | | | | | | | | | | | | |
    Charged-off loans | | (4,123 | ) | | (2,250 | ) | | (1,351 | ) | | (8,159 | ) | | (1,369 | ) | | - | | | (17,252 | ) | | | | | | | | | | | |
    Recovery of previously charged-off loans | | 500 | | | 1,209 | | | 1,464 | | | 4,531 | | | 244 | | | - | | | 7,948 | | | | | | | | | | | | |
    Provision for loan losses | | 5,361 | | | 634 | | | (2,042 | ) | | 4,024 | | | 1,663 | | | (1,783 | ) | | 7,857 | | | | | | | | | | | | |
Balance at December 31, 2013 | $ | 21,372 | | $ | 8,355 | | $ | 7,235 | | $ | 25,134 | | $ | 1,632 | | $ | 4,242 | | $ | 67,970 | | | | | | | | | | | | |
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Collectively evaluated for impairment | $ | 19,298 | | $ | 7,090 | | $ | 7,186 | | $ | 24,660 | | $ | 1,521 | | | | | $ | 59,755 | | | | | | | | | | | | |
Individually evaluated for impairment | | 2,074 | | | 1,265 | | | 49 | | | 474 | | | 111 | | | | | | 3,973 | | | | | | | | | | | | |
Loans acquired with deteriorated credit quality | | - | | | - | | | - | | | - | | | - | | | | | | - | | | | | | | | | | | | |
Balance at December 31, 2013 | $ | 21,372 | | $ | 8,355 | | $ | 7,235 | | $ | 25,134 | | $ | 1,632 | | | | | $ | 67,970 | | | | | | | | | | | | |
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Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Collectively evaluated for impairment | $ | 1,360,965 | | $ | 686,343 | | $ | 315,008 | | $ | 1,601,162 | | $ | 143,186 | | | | | $ | 4,106,664 | | | | | | | | | | | | |
Individually evaluated for impairment | | 22,470 | | | 9,273 | | | 1,183 | | | 4,385 | | | 518 | | | | | | 37,829 | | | | | | | | | | | | |
Loans acquired with deteriorated credit quality | | - | | | - | | | - | | | - | | | - | | | | | | - | | | | | | | | | | | | |
Balance at December 31, 2013 | $ | 1,383,435 | | $ | 695,616 | | $ | 316,191 | | $ | 1,605,547 | | $ | 143,704 | | | | | $ | 4,144 | | | | | | | | | | | | |
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| Commercial | | Consumer | | Construction and | | Commercial and industrial | | Consumer and other | | Unallocated | | Total | | | | | | | | | | | | |
real estate - | real estate - | land development | | | | | | | | | | | |
mortgage | mortgage | | | | | | | | | | | | |
Allowance for Loan Losses: | | | | | | | | | | | | | | | | | | | | | | | | | |
 Balance at December 31, 2013 | $ | 21,372 | | $ | 8,355 | | $ | 7,235 | | $ | 25,134 | | $ | 1,632 | | $ | 4,242 | | $ | 67,970 | | | | | | | | | | | | |
    Charged-off loans | | (123 | ) | | (334 | ) | | (7 | ) | | (824 | ) | | (214 | ) | | - | | | (1,502 | ) | | | | | | | | | | | |
    Recovery of previously charged-off loans | | 1 | | | 72 | | | 31 | | | 398 | | | 66 | | | - | | | 568 | | | | | | | | | | | | |
    Provision for loan losses | | (700 | ) | | (271 | ) | | (494 | ) | | 2,002 | | | 402 | | | (451 | ) | | 488 | | | | | | | | | | | | |
Balance at March 31, 2014 | $ | 20,550 | | $ | 7,822 | | $ | 6,765 | | $ | 26,710 | | $ | 1,886 | | $ | 3,791 | | $ | 67,524 | | | | | | | | | | | | |
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Collectively evaluated for impairment | $ | 19,636 | | $ | 6,426 | | $ | 6,737 | | $ | 25,951 | | $ | 1,764 | | | | | $ | 60,514 | | | | | | | | | | | | |
Individually evaluated for impairment | | 914 | | $ | 1,396 | | | 28 | | | 759 | | | 122 | | | | | | 7,010 | | | | | | | | | | | | |
Loans acquired with deteriorated credit quality | | - | | $ | - | | | - | | | - | | | - | | | | | | - | | | | | | | | | | | | |
Balance at March 31, 2014 | $ | 20,550 | | $ | 7,822 | | $ | 6,765 | | $ | 26,710 | | $ | 1,886 | | | | | $ | 67,524 | | | | | | | | | | | | |
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Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Collectively evaluated for impairment | $ | 1,441,148 | | $ | 693,943 | | $ | 292,954 | | $ | 1,564,538 | | $ | 158,391 | | | | | $ | 4,150,974 | | | | | | | | | | | | |
Individually evaluated for impairment | $ | 15,024 | | $ | 9,649 | | $ | 1,101 | | $ | 4,399 | | $ | 540 | | | | | $ | 30,713 | | | | | | | | | | | | |
Loans acquired with deteriorated credit quality | $ | - | | $ | - | | $ | - | | $ | - | | $ | - | | | | | $ | - | | | | | | | | | | | | |
Balance at March 31, 2014 | $ | 1,456,172 | | $ | 703,592 | | $ | 294,055 | | $ | 1,568,937 | | $ | 158,931 | | | | | $ | 4,182 | | | | | | | | | | | | |
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The adequacy of the allowance for loan losses is assessed at the end of each calendar quarter. The level of the allowance is based upon evaluation of the loan portfolio, current asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect the borrowers' ability to repay (including the timing of future payment), the estimated value of any underlying collateral, composition of the loan portfolio, economic conditions, historical loss experience, industry and peer bank loan quality indications and other pertinent factors, including regulatory recommendations. |
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At March 31, 2014, Pinnacle Financial had granted loans and other extensions of credit amounting to approximately $10.2 million to current directors, executive officers, and their related entities, of which $7.7 million had been drawn upon. At December 31, 2013, Pinnacle Financial had granted loans and other extensions of credit amounting to approximately $11.2 million to directors, executive officers, and their related entities, of which approximately $8.9 million had been drawn upon. These loans and extensions of credit were made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans to persons not related to Pinnacle Bank and did not involve more that the normal risk of collectability or present other unfavorable features. None of these loans to directors, executive officers, and their related entities were impaired at March 31, 2014 or December 31, 2013. |
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Residential Lending |
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At March 31, 2014, Pinnacle Financial had approximately $14.0 million of mortgage loans held-for-sale compared to approximately $12.9 million at December 31, 2013. During the first quarter of 2014, Pinnacle Financial began delivering loans on a mandatory basis to its approved investors. Mandatory delivery exposes Pinnacle to interest rate risk between the initial rate-lock and the ultimate sale of the loan to a third-party. Pinnacle Financial sells loans to third-party investors and has not entered into any forward commitments with investors for future bulk loan sales. All of these loan sales transfer servicing rights to the buyer. During the three months ended March 31, 2014, Pinnacle Financial recognized $952,200 in gains on the sale of these loans, net of commissions paid, compared to $1.8 million during the three months ended March 31, 2013. |
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These mortgage loans held-for-sale are originated internally and are primarily to borrowers in Pinnacle Bank's geographic markets. These sales are typically on a mandatory basis to investors that follow conventional government sponsored entities (GSE) and the Department of Housing and Urban Development/U.S. Department of Veterans Affairs (HUD/VA) guidelines. |
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Each purchaser has specific guidelines and criteria for sellers of loans, and the risk of credit loss with regard to the principal amount of the loans sold is generally transferred to the purchasers upon sale. While the loans are sold without recourse, the purchase agreements require Pinnacle Bank to make certain representations and warranties regarding the existence and sufficiency of file documentation and the absence of fraud by borrowers or other third parties such as appraisers in connection with obtaining the loan. If it is determined that the loans sold were in breach of these representations or warranties, Pinnacle Bank has obligations to either repurchase the loan for the unpaid principal balance and related investor fees or make the purchaser whole for the economic benefits of the loan. To date, repurchase activity pursuant to the terms of these representations and warranties has been insignificant to Pinnacle Bank. |
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