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10 Bank Stocks in the M&A Crosshairs (Update 2)

9. Pinnacle Financial Partners

Shares of Pinnacle Financial Partners (PNFP) of Nashville, Tenn., closed at $16.98 Friday, returning 15% from a year earlier.

Matt Olney originally mentioned Pinnacle as a potential target early last year, "because of its attractive Tennessee footprint."

The company owes $71.25 million in TARP money, having repaid $23.75 million in government bailout funds on Dec. 28.

Pinnacle had $4.9 billion in total assets as of Dec. 30. The company reported 2011 net income available to common shareholders of $37.2 million, or $1.09 a share, improving from a loss of $30.4 million, or 93 cents a share, in 2010. The earnings improvement reflected a significant decline in the provision for loan losses, but also a decline in interest expense.

The company's net interest margin -- the difference between a bank's average yield on loans and investments and it average cost for deposits and wholesale borrowings -- improved to 3.65% in the fourth quarter, from 3.29% a year earlier.

The 2010 ROA was 0.90% and the ROE was 6.25%, according to HighlineFI.

The shares trade for 1.5 times tangible book value, according to HighlineFI, and for 21 times the consensus 2012 EPS estimate of 81 cents.

FIG Partners analyst Brian Martin rates Pinnacle "Market Perform," with a price target of $16.75, saying on Jan. 20 that the company posted a solid fourth-quarter, "underscored by excellent progress in improving credit quality and growing the core earnings power of the bank," and that "Earnings power is expected to build in the coming quarters as the company expands loan volumes and increases its margin."

Martin estimates the company will earn 79 cents a share during 2012, followed by 2013 EPS of $1.16.

The analyst added that "repayment of the remaining TARP preferred remains a priority and is expected late in 2Q12 with no dilution to common shareholders."

Interested in more on Pinnacle Financial Partners? See TheStreet Ratings' report card for this stock.
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