The following is a summary of the activity in various nonperforming asset and troubled debt restructuring categories for the quarter ended June 30, 2012:
|(in thousands)|| Balances
March 31, 2012
Payments, Sales and Reductions
June 30, 2012
|Troubled debt restructurings:|
|Commercial real estate – mortgage||$||15,320||(1,791||)||-||5,511||$||19,040|
|Consumer real estate – mortgage||6,088||(362||)||-||350||6,076|
|Construction and land development||75||(1||)||-||360||434|
|Commercial and industrial||1,222||(329||)||-||59||952|
|Consumer and other||127||(3||)||-||-||124|
|Commercial real estate – mortgage||16,530||(3,886||)||(213||)||1,170||13,601|
|Consumer real estate – mortgage||11,586||(2,105||)||(2,141||)||8,342||15,682|
|Construction and land development||6,979||(1,178||)||(175||)||148||5,774|
|Commercial and industrial||7,242||(4,050||)||-||2,140||5,332|
|Consumer and other||515||(221||)||-||139||433|
|Other real estate:|
|Residential construction and development||12,265||(3,462||)||27||-||8,829|
|Commercial construction and development||15,960||(4,258||)||148||-||11,850|
|Total nonperforming assets and troubled debt restructurings||$||99,703||(25,023||)||-||18,219||$||92,898|
OTHER SECOND QUARTER 2012 HIGHLIGHTS:
- Improving Balance Sheet Composition
- The firm has continued to reposition its deposit base so that average balances for noninterest-bearing demand, interest checking, savings and money market accounts increased to $3.06 billion for the second quarter of 2012 from $2.91 billion for the first quarter of 2012, or 2.4 percent on a linked-quarter basis. Average balances for higher-cost time deposits decreased from $689 million to $655 million, or 5.0 percent, during the same time period. In comparison to the prior year’s quarter, average balances for noninterest-bearing demand, interest checking, savings and money market accounts increased 5.8 percent, while average balances for higher-cost time deposits decreased 27.6 percent.
- As a result of the current bond market and growing loan demand, the firm has reduced the size of its investment portfolio by $107 million since the beginning of 2012, primarily through bond maturities and calls.
- At June 30, 2012, Pinnacle’s ratio of tangible common stockholders’ equity to tangible assets was 8.7 percent, compared to 7.7 percent at June 30, 2011, and 8.8 percent at March 31, 2012.
- At June 30, 2012, Pinnacle’s total risk-based capital ratio was 13.5 percent, compared to 15.5 percent at June 30, 2011, and 15.4 percent at March 31, 2012. The reduction in this ratio was primarily attributable to the firm’s recent redemption of all of the remaining outstanding preferred shares issued in connection with its participation in the U.S. Treasury’s TARP capital purchase program (CPP).
“During the second quarter of 2012, we redeemed all of the remaining outstanding preferred shares previously issued to the U.S. Treasury,” said Harold R. Carpenter, Pinnacle’s chief financial officer. “This redemption, and our subsequent agreement with the Treasury to repurchase the accompanying common stock warrants during the third quarter of 2012, will officially end our participation in the CPP. As we had anticipated, we were able to redeem our remaining outstanding TARP preferred shares with no incremental common share dilution using a combination of available cash and borrowings under a new $25 million credit facility.”
- Operating results
- Net income available to common stockholders for the second quarter of 2012 was $7.8 million, compared to the prior year’s second quarter net income available to common stockholders of $4.8 million. First quarter 2012 net income available to common stockholders totaled $7.2 million.
- Net interest income for the quarter ended June 30, 2012, was $40.2 million, compared to $39.5 million in the first quarter of 2012. Net interest income for the second quarter of 2011 was $37.8 million. Net interest income for the second quarter of 2012 was at its highest quarterly level since the firm’s founding.
- Noninterest income for the quarter ended June 30, 2012, was $9.9 million, compared to $9.9 million for the first quarter of 2012 and $9.8 million for the same quarter last year. Excluding the impact of net securities gains, noninterest income was up 6.7 percent over the same quarter last year.
- Wealth management revenues, which include investment services, trust services and insurance, were $3.5 million during the second quarter of 2012, an increase of 3.2 percent over the same period last year. The increase was due primarily to additional emphasis on internal referral programs and the addition of several new associates over the past two years.
- Gains on mortgage loans sold, net of commissions, were $1.5 million during the second quarter of 2012, compared to $1.5 million during the first quarter of 2012 and $0.8 million during the second quarter of 2011.
“Our second quarter 2012 net interest margin increased modestly to 3.76 percent,” Carpenter said. “Much of our margin expansion in recent quarters has been largely attributable to reductions in our cost of funds. We continue to believe we have additional opportunities to reduce our funding costs in future quarters. However, like others in our industry, we are experiencing continued pressure on our loan yields, and we expect expansion in our net interest margin will be challenging going forward. Nevertheless, we expect that loan growth should positively influence our net interest income results over the next several quarters and result in further revenue growth this year.”
- Noninterest and income tax expense
- Noninterest expense for the quarter ended June 30, 2012, was $33.9 million, compared to $34.4 million in the second quarter of 2011 and $35.8 million in the first quarter of 2012.
- Included in noninterest expense for the second quarter of 2012 was $3.1 million in other real estate expenses, compared to $3.8 million in the second quarter of 2011 and $4.7 million in the first quarter of 2012.
- Income tax expense was $5.1 million for the second quarter of 2012, compared to $288,000 in the second quarter of 2011. The projected effective tax rate for 2012 is approximately 33 percent.