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Derivative Instruments and Hedging Activities
 3 Months Ended
Mar. 31, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities
Note 9 - Derivative Instruments and Hedging Activities
Pinnacle utilizes derivative instruments to manage its exposure to various types of interest rate risk, exposures related to liquidity and credit risk, and to facilitate client transactions. The primary types of derivative instruments utilized by Pinnacle consist of interest rate swaps and options, interest rate lock commitments made to prospective mortgage loan clients, commitments to sell fixed-rate mortgage loans, and foreign currency exchange contracts. Interest rate lock commitments represent derivative instruments since it is intended that such loans will be sold. Pinnacle also provides foreign currency exchange services, primarily forward contracts, with counterparties to allow commercial clients to mitigate exchange rate risk. Pinnacle covers its risk by entering into an offsetting foreign currency exchange forward contract. Pinnacle enters into risk participation agreements with financial institution counterparties where we are either a participant or a lead bank so that the risk of default on the interest rate swaps is shared. Pinnacle either pays or receives a fee depending on the participation type. As of March 31, 2026, Pinnacle has risk participation agreements with a total notional amount of $1.1 billion. Additionally, Pinnacle enters into swaps to facilitate customer transactions and meet their financing needs. Upon entering into these instruments to meet customer needs, Pinnacle enters into offsetting positions in order to minimize the risk to Pinnacle. These swaps qualify as derivatives, but are not designated as hedging instruments.
On June 28, 2024, Pinnacle executed a credit default swap (CDS) with a counterparty with a notional amount of $87 million. The CDS notional amount is equal to 5% of a reference pool of $1.7 billion in first lien consumer real estate - mortgage loans whereby the counterparty will assume the first loss position for these loans up to approximately $87 million in aggregate losses. Pinnacle will pay to the counterparty an annual loss protection fee equal to 7.95% of the corresponding notional amount of the CDS for as long as the loans in the reference pool remain outstanding. The notional amount of the CDS will decline over time as the loans in the reference portfolio are paid down, mature or the counterparty absorbs the first loss portion of losses on those loans. On December 22, 2025, Pinnacle executed a CDS with a notional amount of $80 million. The CDS notional amount is equal to 12.5% of a reference pool of commercial subscription lines of credit whereby the counterparty will assume first loss position for these loans up to approximately $80 million in aggregate losses. Pinnacle will pay to the counterparty an annual loss protection fee equal to 4.94% of the corresponding notional amount until the scheduled termination date of December 22, 2030, subject to early termination criteria not being met. The notional amount of the CDS will fluctuate until the replenishment date, December 22, 2028, subject to early termination criteria not being met, at which time the reference pool will decline over time. Each CDS qualifies as a derivative, but is not designated as a hedging instrument.
See "Part II - Item 8. Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies" to the consolidated financial statements of Pinnacle's 2025 Form 10-K for additional information regarding accounting policies for derivatives.
Hedging Derivatives
Cash flow hedging relationships mitigate exposure to the variability of future cash flows or other forecasted transactions. The hedging strategy converts the SOFR-based variable interest rate on forecasted borrowings to a fixed interest rate and is used in an effort to protect Pinnacle from floating interest rate variability. The contracts effectively modify Pinnacle's exposure to interest rate risk by utilizing receive fixed/pay index-based variable rate interest rate swaps and floors. Pinnacle also uses interest rate caps to mitigate the impact of changing deposit rates of federal fund based deposit accounts.
For cash flow hedges, gain or loss on the derivative instrument is reported as a component of accumulated other comprehensive income (loss), net of the tax impact, and subsequently reclassified into earnings when the hedged transaction affects earnings with the impacts recorded in the same income statement line item used to present the earnings effect of the hedged item. When a cash flow hedge relationship is discontinued but the hedged cash flows, or forecasted transactions, are still expected to occur, gains or losses that were accumulated in OCI are amortized into earnings over the same periods in which the hedged transactions are still expected to affect earnings. If, however, it is probable the forecasted transactions will no longer occur, the remaining accumulated amounts in OCI for the impacted cash flow hedges are immediately recognized in earnings.
Pinnacle utilizes interest rate swaps designated as fair value hedges to mitigate the effect of changing interest rates on the fair values of fixed rate callable securities available for sale. The hedging strategy on securities converts the fixed interest rates to variable interest rates based on SOFR or federal funds rates. These derivatives are designated as partial term hedges of selected cash flows covering specified periods of time prior to the call dates of the hedged securities. Pinnacle also utilizes interest rate swaps designated as fair value hedges to mitigate the effect of changing interest rates on FHLB advances, other borrowings and deposits. Pinnacle has also entered into portfolio layer method fair value hedges on certain available for sale securities. Under the portfolio layer method, the hedged item is designated as a hedged layer of a closed portfolio of available for sale securities that is anticipated to remain outstanding throughout the hedge period. The changes in fair value of the fair value hedges are recorded through earnings with an offset against changes in the fair value of the hedged item within net interest income in the consolidated statements of income. All components of each derivative instrument’s gain (loss) are included in the assessment of hedge effectiveness.
Derivatives not designated as hedges include those that are entered into as either economic hedges to facilitate client needs or as part of Pinnacle's overall risk management strategy. Economic hedges are those that do not qualify to be treated as a fair value hedge or cash flow hedge for accounting purposes but are necessary to economically manage the risk exposure associated with the assets and liabilities of Pinnacle. For derivative instruments that are not designated as hedging instruments, changes in the fair value of the derivatives are recognized in earnings immediately.
Counterparty Credit Risk and Collateral
Entering into derivative contracts potentially exposes Pinnacle to the risk of counterparties’ failure to fulfill their legal obligations, including, but not limited to, potential amounts due or payable under each derivative contract. Notional principal amounts are often used to express the volume of these transactions, but the amounts potentially subject to credit risk are much smaller. Pinnacle assesses the credit risk of its dealer counterparties by regularly monitoring publicly available credit rating information, evaluating other market indicators, and periodically reviewing detailed financials. Dealer collateral requirements are determined via risk-based policies and procedures and in accordance with existing agreements. Pinnacle seeks to minimize dealer credit risk by dealing with highly rated counterparties and by obtaining collateral for exposures above certain predetermined limits. Management closely monitors credit conditions within the client swap portfolio, which management deems to be of higher risk than dealer counterparties. Collateral is secured at origination and credit-related fair value
adjustments are recorded against the asset value of the derivative as deemed necessary based upon an analysis, which includes consideration of the current asset value of the swap, client risk rating, collateral value, and client standing with regards to its swap contractual obligations and other related matters. Such asset values fluctuate based upon changes in interest rates regardless of changes in notional amounts and changes in client specific risk.
Collateral Requirements
Pinnacle's derivative instruments with certain counterparties contain legally enforceable netting that allow multiple transactions to be settled into a single amount. The fair value hedge and interest rate swaps (swaps) assets and liabilities are presented at gross fair value before the application of bilateral collateral and master netting agreements, but after the initial margin posting and daily variation margin payments made with central clearinghouse organizations. Total fair value hedge and swaps assets and liabilities are adjusted to take into consideration the effects of legally enforceable master netting agreements and cash collateral received or paid.
Certain derivative transactions have collateral requirements, both at the inception of the trade and as the value of each derivative position changes. As of March 31, 2026 and December 31, 2025, Pinnacle had recorded the right to reclaim cash collateral of $34 million and $36 million, respectively. As of March 31, 2026 and December 31, 2025, Pinnacle had recorded the obligation to return cash collateral of $122 million and $62 million, respectively.
For derivatives cleared through central clearing houses, the variation margin payments made are legally characterized as settlements of the derivatives. As a result, these variation margin payments are netted against the fair value of the respective derivative contracts in the consolidated balance sheets and related disclosures.
The following table reflects the estimated fair value of derivative instruments included in other assets and other liabilities on the consolidated balance sheets along with their respective notional amounts on a gross basis.
March 31, 2026December 31, 2025
Estimated Fair ValueEstimated Fair Value
(in millions)Notional AmountDerivative Assets Derivative Liabilities Notional AmountDerivative AssetsDerivative Liabilities
Derivatives in cash flow hedging relationships:
Interest rate contracts $12,250 $92 $— $9,750 $83 $— 
Total cash flow hedges$92 $— $83 $— 
Derivatives in fair value hedging relationships:
Interest rate contracts$6,562 $48 $7 $4,340 $47 $1 
Total fair value hedges$48 $7 $47 $1 
Total derivatives designated as hedging instruments$139 $7 $130 $1 
Derivatives not designated
  as hedging instruments:
Interest rate contracts $21,991 $59 $139 $6,425 $40 $40 
Mortgage derivatives - interest rate lock commitments159 2 — 64 1 — 
Mortgage derivatives - forward commitments to sell fixed-rate mortgage loans150 1 — 53 — — 
Foreign exchange contracts171 1 — — — — 
Total derivatives not designated as hedging instruments    $63 $139 $41 $40 
The following table presents the effect of hedging derivative instruments in the consolidated statements of income and the total amounts for the respective line item affected for the three months ended March 31, 2026 and 2025.
Three Months Ended March 31, 2026
Interest IncomeInterest Expense
(in millions)
Loans, including fees(1)
Investment securities
DepositsFHLB advances and other borrowings
Total interest income/expense amounts presented in the consolidated statements of income$1,260 $197 $521 $59 
Gain (loss) on fair value hedging relationships:
Recognized on derivatives$— $(6)$(5)$(13)
Recognized on hedged items— 6 5 13 
Pre-tax income (loss) recognized on fair value hedges$— $— $— $— 
Three Months Ended March 31, 2025
Interest IncomeInterest Expense
(in millions)Loans, including fees
Investment securities
DepositsFHLB advances and other borrowings
Total interest income/expense amounts presented in the consolidated statements of income$548 $87 $274 $29 
Gain (loss) on fair value hedging relationships:
Recognized on derivatives$— $(17)$— $12 
Recognized on hedged items— 17 — (12)
Pre-tax income (loss) recognized on fair value hedges$— $— $— $— 
(1)     See "Part I - Item 1. Financial Statements and Supplementary Data - Note 7 - Shareholders' Equity and Other Comprehensive Income (Loss)" for gain (loss) recognized on cash flow hedging relationships in AOCI.

The following table presents the carrying amount and associated cumulative basis adjustment related to the application of hedge accounting that is included in the carrying amount of the hedged assets/(liabilities) in fair value hedging relationships.
March 31, 2026December 31, 2025
(in millions)Hedged Items Currently DesignatedHedged Items Currently Designated
Line item on the balance sheetCarrying Amount of Assets/(Liabilities)Hedge Accounting Basis AdjustmentCarrying Amount of Assets/(Liabilities)Hedge Accounting Basis Adjustment
Securities available for sale(1)(2)
$3,019 $(48)$3,701 $(48)
Interest-bearing deposits(1,200)5 — — 
FHLB advances and other borrowings(2,866)13 (1,174)(1)
(1) In April 2022, interest rates swaps designated as fair value hedges under the portfolio layer method with notional amounts totaling $164 million and market values totaling $14 million were terminated. Approximately $986,000 in gains were recognized at the time of termination and the remaining $4 million at March 31, 2026 will be accreted as additional interest income on the previously hedged available for sale mortgage backed and municipal securities over the same period as existing purchase discounts or premiums on these securities.
(2) Carrying amount represents amortized cost
The pre-tax effect of changes in fair value from derivative instruments not designated as hedging instruments in the consolidated statements of income for the three months ended March 31, 2026 and 2025 is presented below.
Gain (Loss) Recognized in Consolidated Statements of Income
Three Months Ended March 31,
(in millions)
Location in Consolidated Statements of Income
20262025
Derivatives not designated
  as hedging instruments:
Mortgage derivatives - forward commitments to sell fixed-rate mortgage loansTotal loan sales and servicing1 — 
Foreign exchange contractsCapital markets income(1)—