Securities (Tables)

6 Months Ended

Jun. 30, 2012

Summary of amortized cost and fair value of available-for-sale and held-to-maturity securities

The amortized cost and fair value of securities available-for-sale and held-to-maturity at June 30, 2012 and December 31, 2011 are summarized as follows (in thousands):

	June 30, 2012
	Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value
Securities available-for-sale:
U.S. government agency securities		$	18,733		$	92		$	1		$	18,824
Mortgage-backed securities			545,136			21,544			154			566,526
State and municipal securities			178,327			14,663			18			192,972
Corporate notes and other			9,874			1,543			1			11,416
		$	752,070		$	37,842		$	174		$	789,738
Securities held-to-maturity:
State and municipal securities		$	755		$	16		$	-		$	771
		$	755		$	16		$	-		$	771
	December 31, 2011
	Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value
Securities available-for-sale:
U.S. Government agency securities		$	41,978		$	344		$	9		$	42,313
Mortgage-backed securities			623,684			22,254			371			645,567
State and municipal securities			182,206			13,768			22			195,952
Corporate notes and other			9,687			1,443			-			11,130
		$	857,555		$	37,809		$	402		$	894,962
Securities held-to-maturity:
State and municipal securities		$	2,330		$	39		$	-		$	2,369
		$	2,330		$	39		$	-		$	2,369

Amortized cost and fair value of debt securities by contractual maturity

The amortized cost and fair value of debt securities as of June 30, 2012 by contractual maturity are shown below. Actual maturities may differ from contractual maturities of mortgage-backed securities since the mortgages underlying the securities may be called or prepaid with or without penalty. Therefore, these securities are not included in the maturity categories in the following summary (in thousands):

	June 30, 2012
	Available-for-sale				Held-to-maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	3,994	$	4,056	$	380	$	384
Due in one year to five years		41,691		43,229		375		387
Due in five years to ten years		82,642		90,674		-		-
Due after ten years		78,607		85,253		-		-
Mortgage-backed securities		545,136		566,526		-		-
	$	752,070	$	789,738	$	755	$	771

Classification of investments according to term of unrealized losses of less than twelve months or twelve months or longer

At June 30, 2012 and December 31, 2011, included in securities were the following available-for-sale investments with unrealized losses. The information below classifies these investments according to the term of the unrealized losses of less than twelve months or twelve months or longer (in thousands):

	Investments with an Unrealized Loss of less than 12 months				Investments with an Unrealized Loss of 12 months or longer				Total Investments with an Unrealized Loss
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
At June 30, 2012:

U.S. government agency securities	$	749	$	1	$	-	$	-	$	749	$	1
Mortgage-backed securities		7,218		117		9,608		37		16,826		154
State and municipal securities		1,462		17		331		1		1,793		18
Corporate notes		200		1		-		-		200		1
Total temporarily-impaired securities	$	9,629	$	136	$	9,939	$	38	$	19,568	$	174

At December 31, 2011:

U.S. government agency securities	$	5,452	$	9	$	-	$	-	$	5,452	$	9
Mortgage-backed securities		41,598		341		17,826		30		59,424		371
State and municipal securities		1,967		17		1,205		5		3,172		22
Corporate notes		-		-		-		-		-		-
Total temporarily-impaired securities	$	49,017	$	367	$	19,031	$	35	$	68,048	$	402

Summary of fair value of securities sold, gain or loss recognized and any other-than-temporary impairment identified

Periodically, available-for-sale securities may be sold or the composition of the portfolio realigned to improve yields, quality or marketability, or to implement changes in investment or asset/liability strategy, including maintaining collateral requirements, and raising funds for liquidity purposes. Additionally, if an available-for-sale security loses its investment grade, tax-exempt status, the underlying credit support is terminated or collection otherwise becomes uncertain based on factors known to management, Pinnacle Financial will consider selling the security, but will review each security on a case-by-case basis as these factors become known. The table below shows the fair value of securities that have been sold during 2012 and the amount of gain or loss recognized on those securities as well as any other-than-temporary impairment identified during 2012 (in thousands).

For the quarter ended,	Fair Value of securities sold			Gain recognized		Loss recognized		Net		Other-than-temporary impairment (2)		Gain on the sale of securities, net
March 31, 2012	$	14,360	(1)	$	148	$	-	$	148	$	34	$	114
June 30, 2012		18,273	(3)		99		-		99		-		99

(1)

Pinnacle Financial sold these securities due to their relatively short terms until maturity and a weighted average coupon of 0.50%.

(2)

During the first six months of 2012, Pinnacle Financial determined four mortgage-backed securities were other-than-temporarily impaired (OTTI) because of management's intent to sell them in the second quarter of 2012. The decision to sell was based on their relative underperformance compared

to expectations.

(3)

Pinnacle sold the four securities previously identified as OTTI in the second quarter. Additionally, two securities issued by municipalities in the state of California which management believed could be adversely affected by state budgetary issues were also sold during the second quarter.