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TheStreet Open House

Pinnacle Financial Expands Profitability In Second Quarter 2011

Pinnacle Financial Partners, Inc. (Nasdaq/NGS: PNFP) today reported that its net income per fully diluted common share available to common stockholders was $0.14 for the quarter ended June 30, 2011, compared to net loss per fully diluted common share available to common stockholders of $0.85 for the quarter ended June 30, 2010, and net income per fully diluted common share available to common shareholders of $0.06 for the quarter ended March 31, 2011.

Net income per fully diluted common share available to common stockholders was $0.20 for the six months ended June 30, 2011, compared to net loss per fully diluted common share available to common stockholders of $1.02 for the first six months of 2010.

“We are pleased with another quarter of progress on our two primary priorities of expanding the core earnings capacity of the firm and aggressively dealing with credit issues,” said M. Terry Turner, Pinnacle’s president and chief executive officer. “We intend to maintain continued and significant progress on key measures of credit quality and core earnings, which include capitalizing on the growth opportunities in the Nashville and Knoxville markets.”

Aggressively Dealing with Credit Issues

During the second quarter, Pinnacle reduced classified assets by $49.1 million, a linked-quarter reduction of 15.4 percent and the fifth consecutive quarter of net reductions. Classified assets are composed primarily of nonperforming assets and potential problem loans. Classified assets are down 43.7 percent from their peak at the end of June 2010.

  • Nonperforming assets declined by $20.2 million, a linked-quarter reduction of 15.3 percent and the fourth consecutive quarterly reduction. Pinnacle resolved $38.7 million in nonperforming assets during the second quarter of 2011, compared to resolutions of $33.5 million during the first quarter of 2011.
  • Nonperforming loans declined by $16.6 million during the second quarter of 2011, a linked-quarter reduction of 21.8 percent and the fifth consecutive quarterly reduction. Nonperforming loans are down 49.5 percent from a year ago. Additionally, nonperforming loan inflows decreased from $25.4 million during the first quarter of 2011 to $18.4 million in the second quarter of 2011.
  • Potential problem loans also decreased from $170.6 million at March 31, 2011, to $148.5 million at June 30, 2011, a linked-quarter decrease of 13.0 percent and the fourth consecutive quarter of net reductions. Potential problem loans are down by 53.3 percent from their peak in June 2010.
  • Exposure to construction and land development loans declined from $411.5 million at June 30, 2010, to $282.1 million at June 30, 2011, a decrease of 31.4 percent. Construction and land development loans are down 6.2 percent from $300.7 million at March 31, 2011. Residential land development loans declined from $142.3 million at June 30, 2010, to $84.8 million at June 30, 2011. Residential land development loans were $97.5 million at March 31, 2011.

Expanding the Core Earnings Capacity of the Firm

  • Net interest margin increased to 3.55 percent for the quarter ended June 30, 2011, from 3.23 percent for the quarter ended June 30, 2010. Net interest margin for the quarter ended March 31, 2011, was 3.40 percent.
  • Average balances of noninterest bearing deposit accounts were $629 million in the second quarter of 2011, an increase of 5.8 percent over first quarter 2011 average balances of $595 million and an increase of 24.7 percent over the same quarter last year.
  • Loans at June 30, 2011, were $3.21 billion, a decrease of $10.3 million from $3.22 billion at March 31, 2011. Commercial and industrial loans combined with owner-occupied commercial real estate loans were $1.60 billion at June 30, 2011, an increase of $6.58 million from $1.59 billion at March 31, 2011, the third consecutive quarter of net growth.
  • Revenue for the quarter ended June 30, 2011, amounted to $47.60 million, compared to $44.34 million for the first quarter of 2011 and $46.27 million for the same quarter of last year, a linked-quarter increase of 7.1 percent.
  • Four years after expanding to the Knoxville market, Pinnacle’s operation in Knoxville reached over $500 million in loans at the end of the second quarter 2011.
  • Income before income taxes and TARP expenses increased from $3.50 million for the quarter ended March 31, 2011, to $6.66 million for the quarter ended June 30, 2011, a 90.3 percent increase.

“Our second quarter net interest margin of 3.55 percent was achieved primarily by continued reductions in our funding costs as time deposits continue to reprice downward,” Turner said. “We are particularly pleased with the progress we made during the second quarter in resolution of troubled assets, which is also having a positive impact on our margin. As anticipated, we experienced continued reductions in troubled asset inflows and believe those trends will continue into the third quarter.”

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