Pinnacle Financial Increases Quarterly Net Income Per Fully Diluted Share By 24 Percent Over Last Quarter

Aggressively Dealing with Credit Issues

• Nonperforming assets declined by $10.7 million from Dec. 31, 2011, a linked-quarter reduction of 12.2 percent and the seventh consecutive quarterly reduction.
  • Pinnacle resolved $25.3 million in nonperforming assets during the first quarter of 2012, compared to resolutions of $32.3 million during the fourth quarter of 2011.
  • Nonperforming loans declined by $5.0 million during the first quarter of 2012, a linked-quarter reduction of 10.5 percent and the eighth consecutive quarterly reduction. Nonperforming loans are down 43.9 percent from a year ago.
  • Nonperforming loan inflows were $14.3 million during the first quarter of 2012, a linked-quarter decrease of 27.5 percent. Nonperforming loan inflows were also down 43.7 percent from the first quarter a year ago.
  • Other real estate also declined by $5.7 million during the first quarter of 2012, inclusive of $4.6 million in property foreclosures during the first quarter of 2012.
• Potential problem loans, which are classified loans that continue to accrue interest, declined by $4.1 million from Dec. 31, 2011, a linked-quarter reduction of 3.1 percent. Potential problem loans are down from $173.8 million at March 31, 2011, to $126.3 million at March 31, 2012, a decrease of 27.3 percent. Potential problem loans are down by 60.3 percent from their peak in June 2010.

“Since 2008, our financial performance has been significantly impacted by costs associated with the resolution of problem assets,” Turner said. “As we move through 2012, we believe costs associated with problem asset resolution will decrease as we continue to reduce the absolute size of our problem asset portfolio.”

OTHER FIRST QUARTER 2012 HIGHLIGHTS:

• Deposits
  • For the last several quarters, the firm has worked to reposition its deposit base so that average balances for noninterest-bearing demand, interest checking and money market accounts for the first quarter of 2012 increased to $2.91 billion from $2.88 billion for the fourth quarter of 2011, or 1.0 percent, while average balances for higher-cost time deposits decreased from $759 million to $689 million, or 9.2 percent, during the same time period. In comparison to the prior year’s quarter, average balances for noninterest-bearing demand, interest checking and money market accounts increased 5.1 percent, while average balances for higher-cost time deposits decreased 31.5 percent.
• Operating results
  • Net income available to common stockholders for the first quarter of 2012 was $7.21 million, compared to the prior year ’s first quarter net income available to common stockholders of $2.01 million. Fourth quarter 2011 net income available to common stockholders totaled $5.7 million, which included the impact of $718,000 of additional accretion charges as a result of the Company’s redemption of 25 percent of its TARP preferred shares on Dec. 28, 2011.
  • Noninterest income for the quarter ended March 31, 2012, was $9.9 million, compared to $9.7 million for the fourth quarter of 2011 and $8.3 million for the same quarter last year. Excluding the impact of net securities gains and losses, noninterest income was up 17.3 percent over the same quarter last year.
    • Wealth management revenues, which include investment services, trust services and insurance, were $3.73 million during the first quarter of 2012, an increase of 13.5 percent over the same period last year due primarily to additional emphasis on internal referral programs and the addition of several new associates over the past two years.
    • Net gains on mortgage loans sold increased to $1.50 million during the first quarter of 2012, compared to $1.46 million during the fourth quarter of 2011 and $0.6 million during the first quarter of 2011 due primarily to elevated mortgage loan refinance activity as a result of the current rate environment.

“Our first quarter 2012 net interest margin increased to 3.74 percent,” said Harold R. Carpenter, Pinnacle’s chief financial officer. “Much of our margin expansion in recent quarters has been largely attributable to reductions in our cost of funds. We believe we have additional opportunities to reduce our funding costs in future quarters, but we are gaining more confidence that loan growth will also begin to influence our margin results in a more positive way over the next several quarters. Even though loan pricing is very competitive in our markets, our loan pipelines continue to experience steady growth, creating optimism that we should see gradual expansion of our operating revenues this year.”

• Capital
  • At March 31, 2012, Pinnacle’s ratio of tangible common stockholders’ equity to tangible assets was 8.8 percent, compared to 7.4 percent at March 31, 2011, and 8.4 percent at Dec. 31, 2011. At March 31, 2012, Pinnacle’s total risk-based capital ratio was 15.4 percent, compared to 15.2 percent at March 31, 2011, and 15.3 percent at Dec. 31, 2011.

“Our capital position has become even more solidified with the last several quarters’ results,” Turner said. “We continue to discuss our strategy for redemption of our TARP preferred shares with our primary regulators. We remain optimistic that we should be able to redeem our remaining outstanding TARP preferred shares with limited, if any, dilution to our shareholders.”

• Credit quality
  • The allowance for loan losses represented 2.14 percent of total loans at March 31, 2012, compared to 2.25 percent at Dec. 31, 2011, and 2.46 percent at March 31, 2011.
    • Net charge-offs were $3.63 million for the quarter ended March 31, 2012, compared to $9.73 million for the quarter ended March 31, 2011, and $6.34 million for the fourth quarter of 2011.
    • Provision for loan losses expense decreased from $6.14 million for the first quarter of 2011 to $1.03 million for the first quarter of 2012. Provisioning expense decreased as a result of the overall improvement in the credit quality of the loan portfolio as compared to the same period in 2011.
  • Nonperforming assets were 2.28 percent of total loans plus other real estate at March 31, 2012, compared to 2.66 percent at Dec. 31, 2011, and 4.04 percent at March 31, 2011. The ratio of the allowance for loan losses to nonperforming loans increased to 166.6 percent at March 31, 2012, from 154.6 percent at Dec. 31, 2011, and 103.4 percent at March 31, 2011.
  • Past due loans over 30 days, excluding nonperforming loans, were 0.34 percent of total loans at March 31, 2012, compared to 0.36 percent at Dec. 31, 2011, and 0.36 percent at March 31, 2011.

"We are pleased with the linked-quarter improvement in credit metrics in the first quarter of 2012, and we believe that this trend should continue throughout the year," Carpenter said. "We continue to be optimistic that our 2012 credit costs will reflect meaningful improvement over 2011."

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