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Pinnacle Financial Significantly Expands Profitability

Pinnacle Financial Partners, Inc. (Nasdaq/NGS: PNFP) today reported that its net income per fully diluted common share available to common stockholders was $0.72 for the quarter ended Sept. 30, 2011, compared to net income per fully diluted common share available to common stockholders of $0.02 for the quarter ended Sept. 30, 2010, and net income per fully diluted common share available to common stockholders of $0.14 for the quarter ended June 30, 2011.

Fully diluted earnings per share available to common stockholders were $0.21 excluding $0.51 per share related to the full reversal of a valuation allowance for net deferred tax assets which had been established in the second quarter of 2010.

Net income per fully diluted common share available to common stockholders was $0.92 for the nine months ended Sept. 30, 2011, compared to net loss per fully diluted common share available to common stockholders of $1.00 for the first nine months of 2010.

“Several positive events occurred during the third quarter of 2011,” said M. Terry Turner, Pinnacle’s president and chief executive officer. “We experienced meaningful growth in loans, demand deposits and revenues, continued reductions in problem loans and the reversal of a previously established deferred tax valuation allowance. These items clearly signal that our firm is well positioned to capitalize on future growth opportunities in two very strong banking markets.”

Expanding the Core Earnings Capacity of the Firm

  • Loans at Sept. 30, 2011, were $3.24 billion, an increase of $34.0 million from $3.21 billion at June 30, 2011, or an annualized growth rate of 4.2 percent. Commercial and industrial loans combined with owner-occupied commercial real estate loans were $1.65 billion at Sept. 30, 2011, an increase of $50.0 million from $1.60 billion at June 30, 2011, an annualized growth rate of 12.4 percent and the fourth consecutive quarter of net growth.
  • Average balances of noninterest bearing deposit accounts were $672 million in the third quarter of 2011, the sixth consecutive quarterly increase. Average balances increased 6.8 percent over second quarter 2011 and 25.8 percent over the same quarter last year.
  • Revenue for the quarter ended Sept. 30, 2011, amounted to $48.44 million, compared to $47.60 million for the second quarter of 2011 and $44.65 million for the same quarter of last year, an annualized increase of 7.2 percent. The net interest margin increased to 3.60 percent for the quarter ended Sept. 30, 2011, from 3.23 percent for the quarter ended Sept. 30, 2010. Net interest margin for the quarter ended June 30, 2011, was 3.55 percent.
  • Income before income taxes and TARP expenses increased from $6.66 million for the quarter ended June 30, 2011, to $9.13 million for the quarter ended Sept. 30, 2011, a 37.1 percent linked-quarter increase.
  • Four years after expanding to the Knoxville market, Pinnacle’s operation in Knoxville reached over $531.2 million in loans at the end of the third quarter 2011. Pinnacle also moved up to the sixth-largest among 44 financial institutions in the Knoxville metropolitan statistical area (MSA), according to deposit market share data recently released by the Federal Deposit Insurance Corporation (FDIC).

Aggressively Dealing with Credit Issues

  • Nonperforming assets declined by $12.0 million, a linked-quarter reduction of 10.7 percent and the fifth consecutive quarterly reduction. Pinnacle resolved $29.5 million in nonperforming assets during the third quarter of 2011, compared to resolutions of $38.7 million during the second quarter of 2011.
    • Nonperforming loans declined by $5.1 million during the third quarter of 2011, a linked-quarter reduction of 8.5 percent and the sixth consecutive quarterly reduction. Nonperforming loans are down 47.0 percent from a year ago. Additionally, nonperforming loan inflows decreased from $18.4 million during the second quarter of 2011 to $17.5 million in the third quarter of 2011.
    • Other real estate also declined by $6.9 million during the third quarter of 2011, while the firm foreclosed on $8.1 million in property during the third quarter of 2011.
  • Potential problem loans, which are classified loans that continue to accrue interest, also decreased from $148.5 million at June 30, 2011, to $131.0 million at Sept. 30, 2011, a linked-quarter decrease of 11.7 percent and the fifth consecutive quarter of net reductions. Potential problem loans are down by 58.8 percent from their peak in June 2010.
  • Pinnacle’s classified asset ratio declined from 46.62 percent at June 30, 2011, to 40.83 percent at Sept. 30, 2011. The classified asset ratio was 74.55 percent at Sept. 30, 2010. The classified asset ratio is composed primarily of nonperforming assets and potential problem loans expressed as a percentage of the firm’s Tier 1 risk-based capital and allowance for loan losses.
  • Construction and land development loans were $278.7 million, down 1.2 percent from $282.1 million at June 30, 2011, and 22.5 percent from $359.7 million at Sept. 30, 2010. Residential land development loans declined from $125.2 million at Sept. 30, 2010, to $77.1 million at Sept. 30, 2011. Residential land development loans were $84.8 million at June 30, 2011, a decrease of 9.1 percent.

“We are particularly pleased with our growth in C&I lending during the third quarter of 2011,” Turner said. “Our relationship managers are actively pursuing established businesses in our market, as evidenced by the growth in demand deposits and C&I loans. Additionally, we have been successful in recently hiring additional experienced commercial lenders for our franchise, which should further bolster our ability to grow organically and move market share, a longstanding core strategy of our firm. We also experienced net decreases in nonperforming assets of $12.0 million during the third quarter of 2011, marking our fifth consecutive quarter of decreases since our peak in nonperformers in second quarter of 2010.”

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