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.”

Turner also noted that the firm continues to explore the availability of the U.S. Treasury’s Small Business Lending Fund.

“We continue to talk with our regulators about our potential participation in the SBLF,” Turner said. “Although the likelihood of participation is significantly diminished by recent guidance from the U.S. Treasury regarding SBLF eligibility for bank holding companies who, like us, are restricted in their ability to pay dividends without the prior approval of the Federal Reserve, we are encouraged by our second quarter results and remain hopeful that we can repay TARP with minimal dilution to our common shareholders regardless of SBLF participation.”

OTHER SECOND QUARTER 2011 HIGHLIGHTS:
  • Core Deposits
    • Core deposits amounted to $3.18 billion at June 30, 2011, an increase of 14.4 percent from the $2.78 billion at June 30, 2010. Core deposits at March 31, 2011, were $3.11 billion.
  • Operating results
    • Net income available to common stockholders for the second quarter of 2011 was $4.84 million, compared to the prior year’s second quarter net loss available to common stockholders of $27.87 million. First quarter 2011 net income available to common stockholders totaled $2.01 million.
    • Net interest income for the second quarter of 2011 was $37.80 million, compared to $36.02 million for the first quarter of 2011 and $35.70 million for the same quarter last year.
    • Noninterest income for the quarter ending June 30, 2011, was $9.8 million (including $0.6 million of net securities gains), compared to $8.3 million (net of $0.2 million of net securities losses) in the prior quarter and $10.6 million (including $2.3 million of net securities gains) the same quarter last year. Excluding the impact of net securities gains, noninterest income was up 8.4 percent on a linked-quarter basis and 10.7 percent over the same quarter last year.
    • Wealth management revenues, which include investment services, trust and insurance, were $3.41 million during the second quarter of 2011, an increase of 14.7 percent over the same period last year.

“In addition to our net interest margin increasing to 3.55 percent, our net interest income increased by approximately 4.93 percent from the first quarter results,” said Harold R. Carpenter, Pinnacle’s chief financial officer. “Contributing to this increase were reduced funding costs and the continued reduction in nonperforming assets.”

“We believe we will continue to have opportunities to expand margins in future quarters primarily by reducing the funding cost associated with the firm’s time deposit portfolio,” Carpenter said.

  • Capital
    • At June 30, 2011, Pinnacle’s ratio of tangible common stockholders’ equity to tangible assets was 7.7 percent, compared to 7.1 percent at June 30, 2010, and 7.4 percent at March 31, 2011. At June 30, 2011, Pinnacle’s total risk-based capital ratio was 15.5 percent, compared to 14.8 percent at June 30, 2010, and 15.2 percent at March 31, 2011.
  • Credit quality
    • Net charge-offs were $8.61 million for the quarter ended June 30, 2011, down from $33.46 million for the quarter ended June 30, 2010, and $9.73 million for the first quarter of 2011.
    • The allowance for loan losses represented 2.40 percent of total loans at June 30, 2011, compared to 2.46 percent at March 31, 2011, and 2.61 percent at June 30, 2010.
    • Nonperforming assets were 3.44 percent of total loans plus other real estate at June 30, 2011, compared to 4.04 percent at March 31, 2011, and 4.77 percent at June 30, 2010. The ratio of the allowance for loan losses to nonperforming loans increased to 128.9 percent at June 30, 2011, from 103.4 percent at March 31, 2011.
    • Past due loans over 30 days, excluding nonperforming loans, were 0.40 percent of total loans at June 30, 2011, compared to 0.36 percent at March 31, 2011, and 0.66 percent at June 30, 2010.

The following is a summary of the activity in various nonperforming asset and restructured accruing loan categories for the quarter ended June 30, 2011:
                   
(in thousands)

Balances

Mar. 31, 2011

Payments,

Sales and

Reductions

Foreclosures

Inflows

Balances

June 30, 2011
Restructured accruing loans:
Residential construction and development $ - $ - $ - $ - $ -
Commercial construction and development - - - - -
Other   15,285       (3,402 )       -         1,107       12,990
Totals   15,285       (3,402 )       -         1,107       12,990
Nonperforming loans:
Residential construction and development 12,508 (1,578 ) - 446 11,376
Commercial construction and development 24,391 (393 ) (8,440 ) 4,718 20,276
Other   39,469       (21,511 )       (3,166 )       13,283       28,075
Totals   76,368       (23,482 )       (11,606 )       18,447       59,727
Other real estate:
Residential construction and development 18,611 (2,847 ) - - 15,764
Commercial construction and development 25,013 (6,116 ) 8,440 - 27,337
Other   12,376       (6,248 )       3,166         -       9,294
Totals   56,000       (15,211 )       11,606         -       52,395
Total nonperforming assets and restructured accruing loans $ 147,653     $ (42,095 )     $ -       $ 19,554     $ 125,112
 
 
  • Noninterest expense and taxes
    • Noninterest expense for the quarter ended June 30, 2011, was $34.36 million, compared to $36.49 million in the second quarter of 2010 and $34.70 million in the first quarter of 2011.
    • Compensation expense was $18.52 million during the second quarter of 2011, compared to $15.85 million during the second quarter of 2010 and $17.92 million during the first quarter of 2011.
    • Included in noninterest expense for the second quarter of 2011 was $3.83 million in other real estate expenses, compared to $7.41 million in the second quarter of 2010. First quarter 2011 other real estate expense was approximately $4.33 million.
    • Included in income tax expense for the second quarter of 2011 was $288,000 related to the resolution of a recently completed federal tax examination for fiscal years 2007-2009.

Carpenter noted that compensation costs for the second quarter of 2011 increased by 3.35 percent over the first quarter of 2011, driven largely by increased incentive accruals pursuant to the firm’s annual cash incentive plan.

“Given our performance so far this year on credit quality and earnings, the two primary influences on our annual cash incentive payments, we increased our incentive allocation to a potential full payout of our plan award to participating associates,” Carpenter said. “We expect compensation expense to level out for the remainder of the year except for modest increases related to several new relationship managers we are actively recruiting.”

Excluding the impact of OREO expenses, the second quarter of 2011 noninterest expense was approximately $30.53 million, compared to $30.37 million in the first quarter of 2011 and $29.08 million in the second quarter of 2010. Included in the other real estate expense for the quarter was $1.6 million of additional write downs of existing balances based on updated appraisals. The firm also recorded $796,000 in losses related to the disposition of $15.2 million of other real estate properties. Carpenter noted that the firm anticipates foreclosures of approximately $20 million in the third quarter of 2011 but that final resolution of several larger properties will affect other real estate balances for the third quarter.

“We made meaningful progress during the second quarter on our priorities of improving the core earnings capacity of the firm and aggressively dealing with credit issues, and we would expect continued progress on those priorities in the third quarter,” Carpenter said.

WEBCAST AND CONFERENCE CALL INFORMATION

Pinnacle will host a webcast and conference call at 8:30 a.m. (CDT) on Wednesday, July 20, 2011, to discuss second quarter 2011 results and other matters. To access the call for audio only, please call 1-877-602-7944. For the presentation and streaming audio, please access the webcast on the investor relations page of Pinnacle’s website at www.pnfp.com.

For those unable to participate in the webcast, it will be archived on the investor relations page of Pinnacle’s website at www.pnfp.com for 90 days following the presentation.

Pinnacle Financial Partners provides a full range of banking, investment, mortgage and insurance products and services designed for small- to mid-sized businesses and their owners and individuals interested in a comprehensive relationship with their financial institution. Comprehensive wealth management services, such as financial planning and trust, help clients increase, protect and distribute their assets.

The firm began operations in a single downtown Nashville location in Oct. 2000 and has since grown to over $4.83 billion in assets at June 30, 2011. In 2007, Pinnacle launched an expansion into Knoxville, Tennessee. At June 30, 2011, Pinnacle is the second-largest bank holding company headquartered in Tennessee, with 31 offices in eight Middle Tennessee counties and three offices in Knoxville. The firm was also added to Standard & Poor’s SmallCap 600 index in 2009.

Additional information concerning Pinnacle can be accessed at www.pnfp.com.

Certain of the statements in this release may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words “expect,” “anticipate,” “goal,” “objective,” “intend,” “plan,” “believe,” “should,” “seek,” “estimate” and similar expressions are intended to identify such forward-looking statements, but other statements not based on historical information may also be considered forward-looking. All forward-looking statements are subject to risks, uncertainties and other factors that may cause the actual results, performance or achievements of Pinnacle Financial to differ materially from any results expressed or implied by such forward-looking statements. Such risks include, without limitation, (i) deterioration in the financial condition of borrowers resulting in significant increases in loan losses and provisions for those losses; (ii) continuation of the historically low short-term interest rate environment; (iii) the reduction of Pinnacle Financial’s loan balances, and conversely, the inability of Pinnacle Financial to ultimately grow its loan portfolio in the Nashville-Davidson-Murfreesboro-Franklin MSA and the Knoxville MSA; (iv) changes in loan underwriting, credit review or loss reserve policies associated with economic conditions, examination conclusions, or regulatory developments; (v) effectiveness of Pinnacle Financial’s asset management activities in improving, resolving or liquidating lower-quality assets; (vi) increased competition with other financial institutions; (vii) greater than anticipated deterioration or lack of sustained growth in the national or local economies including the Nashville-Davidson-Murfreesboro-Franklin MSA and the Knoxville MSA, particularly in commercial and residential real estate markets; (viii) rapid fluctuations or unanticipated changes in interest rates; (ix) the results of regulatory examinations; (x) the development of any new market other than Nashville or Knoxville; (xi) a merger or acquisition; (xii) any matter that would cause Pinnacle Financial to conclude that there was impairment of any asset, including intangible assets; (xiii) the impact of governmental restrictions on entities participating in the Capital Purchase Program, of the U.S. Department of the Treasury (the “Treasury”); (xiv) further deterioration in the valuation of other real estate owned; (xv) inability to comply with regulatory capital requirements and to secure any required regulatory approvals for capital actions; (xvi) changes in state and federal legislation, regulations or policies applicable to banks and other financial service providers, including regulatory or legislative developments arising out of current unsettled conditions in the economy, including implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act; and (xvii) Pinnacle Financial recording a further valuation allowance related to its deferred tax asset. A more detailed description of these and other risks is contained in Pinnacle Financial’s most recent annual report on Form 10-K filed with the Securities and Exchange Commission on February 23, 2011 and most recent quarterly report on Form 10-Q filed with the Securities and Exchange commission on May 5, 2011. Many of such factors are beyond Pinnacle Financial’s ability to control or predict, and readers are cautioned not to put undue reliance on such forward-looking statements. Pinnacle Financial disclaims any obligation to update or revise any forward-looking statements contained in this release, whether as a result of new information, future events or otherwise.
       
 
 
 
 
 
PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS – UNAUDITED
 
      June 30, 2011     December 31, 2010

ASSETS
Cash and noninterest-bearing due from banks $ 62,316,425 $ 40,154,247
Interest-bearing due from banks 147,703,476 140,647,481
Federal funds sold and other 6,231,745 7,284,685
Short-term discount notes   -         499,768  
Cash and cash equivalents 216,251,646 188,586,181
 
Securities available-for-sale, at fair value 922,780,234 1,014,316,831

Securities held-to-maturity (fair value of $2,791,215 and $4,411,856 at June 30, 2011 and December 31, 2010, respectively)
2,727,272 4,320,486
Mortgage loans held-for-sale 14,161,572 16,206,034
 
Loans 3,207,104,232 3,212,440,190
Less allowance for loan losses   (76,970,502 )       (82,575,235 )
Loans, net 3,130,133,730 3,129,864,955
 
Premises and equipment, net 79,999,621 82,374,228
Other investments 42,757,144 42,282,255
Accrued interest receivable 15,723,962 16,364,573
Goodwill 244,083,193 244,090,311
Core deposit and other intangible assets 9,273,297 10,705,105
Other real estate owned 52,395,174 59,608,224
Other assets   101,045,934         100,284,697  
Total assets $ 4,831,332,779       $ 4,909,003,880  
 

LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 662,017,752 $ 586,516,637
Interest-bearing 572,465,335 573,670,188
Savings and money market accounts 1,634,633,008 1,596,306,386
Time   892,403,408         1,076,564,179  
Total deposits 3,761,519,503 3,833,057,390
Securities sold under agreements to repurchase 124,513,664 146,294,379
Federal Home Loan Bank advances 111,190,714 121,393,026
Subordinated debt 97,476,000 97,476,000
Accrued interest payable 3,031,394 5,197,925
Other liabilities   34,373,482         28,127,875  
Total liabilities 4,132,104,757 4,231,546,595
 
Stockholders’ equity:

Preferred stock, no par value; 10,000,000 shares authorized; 95,000 shares issued and outstanding at June 30, 2011 and December 31, 2010
91,422,313 90,788,682

Common stock, par value $1.00; 90,000,000 shares authorized; 34,136,163 issued and outstanding at June 30, 2011 and 33,870,380 issued and outstanding at December 31, 2010
34,136,163 33,870,380
Common stock warrants 3,348,402 3,348,402
Additional paid-in capital 533,557,342 530,829,019
Retained earnings 19,864,142 12,996,202
Accumulated other comprehensive income, net of taxes   16,899,660         5,624,600  
Stockholders’ equity   699,228,022         677,457,285  
Total liabilities and stockholders’ equity $ 4,831,332,779       $ 4,909,003,880  
 
This information is preliminary and based on company data available at the time of the presentation.
 
 
 
 
 
 
 
PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS – UNAUDITED
               
Three Months Ended Six Months Ended
June 30 June 30
      2011     2010     2011     2010
Interest income:
Loans, including fees $ 38,905,155 $ 40,323,693 $ 77,258,636 $ 81,398,800
Securities:
Taxable 6,479,280 8,058,265 12,840,179 17,145,853
Tax-exempt 1,837,811 1,985,946 3,773,699 4,036,199
Federal funds sold and other   566,874       560,611         1,140,880       1,037,753  
Total interest income   47,789,120       50,928,515         95,013,394       103,618,605  
 
Interest expense:
Deposits 8,306,751 12,925,139 17,730,992 26,388,954
Securities sold under agreements to repurchase 345,444 364,648 727,013 916,961
Federal Home Loan Bank advances and other borrowings   1,341,546       1,941,437         2,739,377       4,055,492  
Total interest expense   9,993,741       15,231,224         21,197,382       31,361,407  
Net interest income 37,795,379 35,697,291 73,816,012 72,257,198
Provision for loan losses   6,587,189       30,508,685         12,726,327       43,734,605  
Net interest income after provision for loan losses 31,208,190 5,188,606 61,089,685 28,522,593
 
Noninterest income:
Service charges on deposit accounts 2,330,206 2,429,200 4,591,663 4,794,511
Investment services 1,637,426 1,315,263 3,145,512 2,551,646
Insurance sales commissions 1,004,246 904,359 2,053,478 2,003,378
Gain on loans sold, net 789,258 908,611 1,398,635 1,423,809
Net gain on sale of investment securities 610,302 2,259,124 451,199 2,623,674
Trust fees 769,935 754,515 1,499,923 1,651,088
Other noninterest income   2,668,041       1,998,082         4,993,061       4,006,694  
Total noninterest income   9,809,414       10,569,154         18,133,471       19,054,800  
 
Noninterest expense:
Salaries and employee benefits 18,523,531 15,847,121 36,447,153 32,851,647
Equipment and occupancy 5,060,014 5,492,406 10,066,724 10,858,593
Other real estate owned 3,825,608 7,411,206 8,159,726 12,813,359
Marketing and other business development 766,422 793,696 1,520,173 1,547,614
Postage and supplies 545,097 700,505 1,034,974 1,434,044
Amortization of intangibles 715,905 746,001 1,431,809 1,492,002
Other noninterest expense   4,920,766       5,500,424         10,397,612       11,660,655  
Total noninterest expense   34,357,343       36,491,359         69,058,171       72,657,914  
Income (loss) before income taxes 6,660,261 (20,733,599 ) 10,164,985 (25,080,521 )
Income tax expense   288,414       5,630,431         288,414       5,106,734  
Net Income (loss) 6,371,847 (26,364,030 ) 9,876,571 (30,187,255 )
Preferred dividends 1,200,694 1,200,694 2,388,194 2,388,194
Accretion on preferred stock discount   327,657       306,466         633,631       664,459  
Net income (loss) available to common stockholders $ 4,843,496     $ (27,871,190 )     $ 6,854,746     $ (33,239,908 )
 
Per share information:
Basic net income (loss) per common share available to common stockholders $ 0.14       ($0.85 )     $ 0.21       ($1.02 )
Diluted net income (loss) per common share available to common stockholders $ 0.14       ($0.85 )     $ 0.20       ($1.02 )
 
Weighted average shares outstanding:
Basic 33,454,229 32,675,221 33,410,385 32,616,943
Diluted 34,095,636 32,675,221 34,054,746 32,616,943
 
This information is preliminary and based on company data available at the time of the presentation.
 
 
 
 
 
 
 
PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES
ANALYSIS OF INTEREST INCOME AND EXPENSE, RATES AND YIELDS-UNAUDITED
                       

 
Three months ended Three months ended

(dollars in thousands)
    June 30, 2011     June 30, 2010

Average

Balances
    Interest    

Rates/

Yields
   

Average

Balances
    Interest    

Rates/

Yields
Interest-earning assets:
Loans (1) $ 3,211,591 $ 38,905 4.87 % $ 3,418,928 $ 40,324 4.74 %
Securities:
Taxable 779,882 6,479 3.33 % 760,338 8,058 4.25 %
Tax-exempt (2) 192,868 1,838 5.04 % 202,063 1,986 5.20 %
Federal funds sold and other   163,211       567     1.50 %       146,142       561     1.65 %
Total interest-earning assets 4,347,552 $ 47,789     4.47 % 4,527,471 $ 50,929     4.58 %
Nonearning assets
Intangible assets 253,803 256,753
Other nonearning assets   225,376   212,224
Total assets $ 4,826,731 $ 4,996,448
 
Interest-bearing liabilities:
Interest-bearing deposits:
Interest checking $ 592,374 $ 989 0.67 % $ 531,157 $ 901 0.68 %
Savings and money market 1,597,216 3,789 0.95 % 1,286,115 4,538 1.42 %
Time   904,094       3,529     1.57 %       1,495,347       7,486     2.01 %
Total interest-bearing deposits 3,093,684 8,307 1.08 % 3,312,619 12,925 1.57 %
Securities sold under agreements to repurchase 175,705 345 0.79 % 210,798 365 0.69 %

Federal Home Loan Bank advances and other borrowings
114,072 679 2.42 % 147,491 1,059 2.88 %
Subordinated debt   97,476       663     2.73 %       97,476       882     3.63 %
Total interest-bearing liabilities 3,480,937 9,994 1.15 % 3,768,384 15,231 1.62 %
Noninterest-bearing deposits   628,929       -     -         504,354       -     -  
Total deposits and interest-bearing liabilities 4,109,866 $ 9,994     0.98 % 4,272,738 $ 15,231     1.43 %
Other liabilities 25,845 19,524
Stockholders' equity   691,020   704,186
Total liabilities and stockholders' equity $ 4,826,731 $ 4,996,448
Net interest income $ 37,795 $ 35,697
Net interest spread (3) 3.32 % 2.96 %
Net interest margin (4) 3.55 % 3.23 %
 
 
 
(1) Average balances of nonperforming loans are included in the above amounts.
(2) Yields computed on tax-exempt instruments on a tax equivalent basis.
(3) Yields realized on interest-bearing assets less the rates paid on interest-bearing liabilities. The net interest spread calculation excludes the impact of demand deposits. Had the impact of demand deposits been included, the net interest spread for the quarter ended June 30, 2011 would have been 3.49% compared to a net interest spread of 3.15% for the quarter ended June 30, 2010.
(4) Net interest margin is the result of annualized net interest income calculated on a tax equivalent basis divided by average interest-earning assets for the period.
 
 
This information is preliminary and based on company data available at the time of the presentation.
 
 
 
 
 
 
 
PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES
ANALYSIS OF INTEREST INCOME AND EXPENSE, RATES AND YIELDS-UNAUDITED
                       

 
Six months ended Six months ended

(dollars in thousands)
    June 30, 2011     June 30, 2010

 

Average

Balances
    Interest    

Rates/

Yields
   

Average

Balances
    Interest    

Rates/

Yields
Interest-earning assets:
Loans (1) $ 3,201,381 $ 77,259 4.87 % $ 3,469,161 $ 81,399 4.74 %
Securities:
Taxable 795,749 12,840 3.25 % 792,192 17,146 4.36 %
Tax-exempt (2) 195,694 3,774 5.13 % 205,292 4,036 5.23 %
Federal funds sold and other   174,498       1,141     1.42 %       122,565       1,037     1.85 %
Total interest-earning assets 4,367,322 $ 95,013     4.45 % 4,589,210 $ 103,618     4.62 %
Nonearning assets
Intangible assets 254,164 257,132
Other nonearning assets   226,131   212,914
Total assets $ 4,847,617 $ 5,059,256
 
Interest-bearing liabilities:
Interest-bearing deposits:
Interest checking $ 592,365 $ 1,944 0.66 % $ 503,640 $ 1,702 0.68 %
Savings and money market 1,588,320 7,850 1.00 % 1,268,909 8,837 1.40 %
Time   954,646       7,937     1.68 %       1,562,665       15,850     2.05 %
Total interest-bearing deposits 3,135,331 17,731 1.14 % 3,335,214 26,389 1.60 %
Securities sold under agreements to repurchase 180,561 727 0.81 % 242,530 917 0.76 %

Federal Home Loan Bank advances and other borrowings
113,889 1,420 2.52 % 163,298 2,326 2.87 %
Subordinated debt   97,476       1,319     2.73 %       97,476       1,729     3.58 %
Total interest-bearing liabilities 3,527,257 21,197 1.21 % 3,838,518 31,361 1.65 %
Noninterest-bearing deposits   611,885       -     -         500,006       -     -  
Total deposits and interest-bearing liabilities 4,139,142 $ 21,197     1.03 % 4,338,524 $ 31,361     1.46 %
Other liabilities 21,620 15,055
Stockholders' equity   686,855   705,677
$ 4,847,617 $ 5,059,256
Net interest income $ 73,816 $ 72,257
Net interest spread (3) 3.24 % 2.97 %
Net interest margin (4) 3.47 % 3.24 %
 
 
 
(1) Average balances of nonperforming loans are included in the above amounts.
(2) Yields computed on tax-exempt instruments on a tax equivalent basis.

(3) Yields realized on interest-earning assets less the rates paid on interest-bearing liabilities. The net interest spread calculation excludes the impact of demand deposits. Had the impact of demand deposits been included, the net interest spread for the six months ended June 30, 2011 would have been 3.42% compared to a net interest spread of 3.16% for the six months ended June 30, 2010.
(4) Net interest margin is the result of annualized net interest income calculated on a tax equivalent basis divided by average interest-earning assets for the period.
 
This information is preliminary and based on company data available at the time of the presentation.
 
 
 
 
 
 
 
PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL DATA – UNAUDITED
                       
 

 
June March December September June March

(dollars in thousands)
    2011     2011     2010     2010     2010     2010
 
Balance sheet data, at quarter end:
Commercial real estate - mortgage loans $ 1,091,283 1,102,533 1,094,615 1,103,261 1,125,823 1,144,246
Consumer real estate - mortgage loans 708,280 698,693 705,487 720,140 709,121 730,247
Construction and land development loans 282,064 300,697 331,261 359,729 411,455 486,296
Commercial and industrial loans 1,058,263 1,047,754 1,012,091 995,743 1,009,991 1,031,512
Consumer and other 67,214 67,753 68,986 73,052 77,510 87,235
Total loans 3,207,104 3,217,430 3,212,440 3,251,923 3,333,900 3,479,536
Allowance for loan losses (76,971 ) (78,988 ) (82,575 ) (84,550 ) (87,107 ) (90,062 )
Securities 925,508 984,200 1,018,637 968,532 907,296 989,325
Total assets 4,831,333 4,820,991 4,909,004 4,961,603 4,958,478 5,021,689
Noninterest-bearing deposits 662,018 608,428 586,517 581,181 529,867 522,928
Total deposits 3,761,520 3,731,883 3,833,057 3,825,634 3,853,400 3,836,362
Securities sold under agreements to repurchase 124,514 165,132 146,294 191,392 159,490 200,489
FHLB advances and other borrowings 111,191 111,351 121,393 121,435 131,477 157,319
Subordinated debt 97,476 97,476 97,476 97,476 97,476 97,476
Total stockholders’ equity 699,228 681,226 677,457 686,529 681,915 700,261
 
Balance sheet data, quarterly averages:
Total loans $ 3,211,591 3,191,076 3,217,738 3,295,531 3,418,928 3,520,012
Securities 972,750 1,010,344 993,236 954,869 962,401 1,032,957
Total earning assets 4,347,552 4,387,331 4,441,672 4,519,956 4,527,471 4,651,695
Total assets 4,826,731 4,868,745 4,937,181 5,001,373 4,996,448 5,122,773
Noninterest-bearing deposits 628,929 594,651 575,606 534,171 504,354 495,610
Total deposits 3,722,613 3,772,092 3,814,572 3,859,124 3,816,973 3,853,671
Securities sold under agreements to repurchase 175,705 185,471 194,283 210,037 210,798 274,614
FHLB advances and other borrowings 114,072 113,705 121,414 126,130 147,491 179,280
Subordinated debt 97,476 97,476 97,476 97,476 97,476 97,476
Total stockholders’ equity 691,020 682,638 689,976 686,898 704,186 707,210
 
Statement of operations data, for the three months ended:
Interest income $ 47,789 47,224 49,079 50,650 50,929 52,690
Interest expense   9,994       11,204       13,023       14,590       15,231       16,130  
Net interest income 37,795 36,020 36,056 36,060 35,697 36,560
Provision for loan losses   6,587       6,139       5,172       4,789       30,509       13,226  
Net interest income after provision for loan losses 31,208 29,881 30,884 31,271 5,189 23,334
Noninterest income 9,809 8,324 8,666 8,594 10,569 8,486
Noninterest expense   34,357       34,701       36,452       37,774       36,491       36,167  
Income (loss) before taxes 6,660 3,504 3,098 2,091 (20,734 ) (4,347 )
Income tax expense (benefit) 288 - (697 ) - 5,630 (525 )
Preferred dividends and accretion   1,529       1,492       1,547       1,542       1,507       1,545  
Net income (loss) available to common stockholders $ 4,843       2,011       2,248       549       (27,871 )     (5,368 )
 
Profitability and other ratios:
Return on avg. assets (1) 0.40 % 0.17 % 0.18 % 0.04 % (2.24 %) (0.42 %)
Return on avg. equity (1) 2.81 % 1.19 % 1.29 % 0.32 % (15.88 %) (3.08 %)
Net interest margin (1) (2) 3.55 % 3.40 % 3.29 % 3.23 % 3.23 % 3.25 %
Noninterest income to total revenue (3) 20.61 % 18.77 % 19.38 % 19.25 % 22.84 % 18.84 %
Noninterest income to avg. assets (1) 0.82 % 0.69 % 0.70 % 0.68 % 0.85 % 0.67 %
Noninterest exp. to avg. assets (1) 2.86 % 2.89 % 2.93 % 3.00 % 2.93 % 2.86 %
Efficiency ratio (4) 72.17 % 78.25 % 81.51 % 84.59 % 78.87 % 80.29 %
Avg. loans to average deposits 86.27 % 84.60 % 84.35 % 85.40 % 89.57 % 91.34 %
Securities to total assets 19.16 % 20.41 % 20.75 % 19.52 % 18.30 % 19.70 %

Average interest-earning assets to average interest-bearing liabilities
124.90 % 122.75 % 121.62 % 120.26 % 120.14 % 118.99 %
Brokered time deposits to total deposits (16) 0.00 % 0.00 % 0.03 % 1.80 % 3.70 % 5.40 %
 
This information is preliminary and based on company data available at the time of the presentation.
 
 
 
 
 
 
 
PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL DATA – UNAUDITED
                       
 

 
June March December September June March

(dollars in thousands)
    2011     2011     2010     2010     2010     2010
 
Asset quality information and ratios:
Nonperforming assets:
Nonaccrual loans $ 59,727 76,368 80,863 103,127 118,331 131,381
Other real estate (ORE)   52,395       56,000       59,608       48,710       42,616       24,704  
Total nonperforming assets $ 112,122       132,368       140,471       151,837       160,947       156,085  

Past due loans over 90 days and still accruing interest
$ 481 1,151 138 3,639 3,116 395
Restructured accruing loans (5) 12,990 15,285 20,468 13,468 10,861 9,534
 
Net loan charge-offs $ 8,605 9,726 7,146 7,346 33,463 15,123
Allowance for loan losses to nonaccrual loans 128.9 % 103.4 % 102.1 % 82.0 % 73.6 % 68.5 %
As a percentage of total loans:
Past due accruing loans over 30 days 0.40 % 0.36 % 0.30 % 0.67 % 0.66 % 1.54 %
Potential problem loans (6) 4.62 % 5.31 % 6.95 % 8.23 % 9.30 % 8.63 %
Allowance for loan losses 2.40 % 2.46 % 2.57 % 2.60 % 2.61 % 2.59 %
Nonperforming assets to total loans and ORE 3.44 % 4.04 % 4.29 % 4.60 % 4.77 % 4.45 %
Nonperforming assets to total assets 2.32 % 2.75 % 2.86 % 3.06 % 3.25 % 3.11 %

Annualized net loan charge-offs year-to-date to avg. loans (7)
1.14 % 1.22 % 1.96 % 2.26 % 2.84 % 1.74 %
Avg. commercial loan internal risk ratings (6) 4.8 4.8 4.8 4.9 4.9 4.9
 
Interest rates and yields:
Loans 4.87 % 4.88 % 4.99 % 4.96 % 4.74 % 4.74 %
Securities 3.67 % 3.58 % 3.48 % 3.97 % 4.45 % 4.63 %
Total earning assets 4.47 % 4.43 % 4.45 % 4.51 % 4.58 % 4.66 %
Total deposits, including non-interest bearing 0.90 % 1.01 % 1.16 % 1.27 % 1.36 % 1.42 %
Securities sold under agreements to repurchase 0.79 % 0.83 % 0.81 % 0.82 % 0.69 % 0.82 %
FHLB advances and other borrowings 2.42 % 2.65 % 2.60 % 2.90 % 2.88 % 2.87 %
Subordinated debt 2.73 % 2.73 % 2.72 % 3.78 % 3.63 % 3.52 %
Total deposits and interest-bearing liabilities 0.98 % 1.09 % 1.22 % 1.35 % 1.43 % 1.49 %
 
Capital ratios (8):
Stockholders’ equity to total assets 14.5 % 14.1 % 13.8 % 13.8 % 13.8 % 13.9 %
Leverage 11.2 % 11.0 % 10.7 % 10.5 % 10.4 % 10.6 %
Tier one risk-based 13.9 % 13.6 % 13.8 % 13.5 % 13.1 % 13.4 %
Total risk-based 15.5 % 15.2 % 15.4 % 15.1 % 14.8 % 15.0 %
Tangible common equity to tangible assets 7.7 % 7.4 % 7.1 % 7.2 % 7.1 % 7.4 %
Tangible common equity to risk weighted assets 9.6 % 9.1 % 9.1 % 9.3 % 9.0 % 9.1 %
 
This information is preliminary and based on company data available at the time of the presentation.
 
 
 
 
 
 
 
PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL DATA – UNAUDITED
                       
 

 
June March December September June March

(dollars in thousands, except per share data)
    2011     2011     2010     2010     2010     2010
 
Per share data:
Earnings (loss) – basic $ 0.14 0.06 0.07 0.02 (0.85 ) (0.16 )
Earnings (loss) – diluted $ 0.14 0.06 0.07 0.02 (0.85 ) (0.16 )
Book value per common share at quarter end (9) $ 17.71 17.19 17.22 17.61 17.61 18.20
Tangible common equity per common share $ 10.38 9.85 9.80 10.12 10.04 10.60
 
Weighted avg. common shares – basic 33,454,229 33,366,053 33,062,533 32,857,428 32,675,221 32,558,016
Weighted avg. common shares – diluted 34,095,636 34,013,810 33,670,890 33,576,963 32,675,221 32,558,016
Common shares outstanding 34,136,163 34,132,256 33,870,380 33,660,462 33,421,741 33,351,118
 
Investor information:
Closing sales price $ 15.56 16.54 13.58 9.19 12.85 15.11
High closing sales price during quarter $ 16.82 16.60 13.74 14.33 18.93 16.88
Low closing sales price during quarter $ 14.15 13.55 9.27 8.51 11.81 13.10
 
Other information:
Gains on sale of loans and loan participations sold:
Mortgage loan sales:
Gross loans sold $ 68,506 70,981 143,793 137,094 92,144 72,196
Gross fees (10) $ 1,380 1,129 2,610 2,503 1,669 1,157

Gross fees as a percentage of mortgage loans originated
2.01 % 1.59 % 1.81 % 1.83 % 1.81 % 1.60 %
Gains (losses) on sales of investment securities, net $ 610 (159 ) - - 2,259 365
Brokerage account assets, at quarter-end (11) $ 1,101,000 1,110,000 1,038,000 966,000 921,000 974,000
Trust account assets, at quarter-end $ 663,304 730,000 693,000 647,000 627,000 648,000
Floating rate loans as a percentage of total loans (12) 34.7 % 35.4 % 36.9 % 37.9 % 37.8 % 38.9 %

Balance of commercial loan participations sold to other banks and serviced by Pinnacle, at quarter end
$ 50,797 60,784 55,632 57,964 66,503 78,529
Core deposits (13) $ 3,182,920 3,109,972 3,117,969 2,925,673 2,781,748 2,676,016
Core deposits to total funding (13) 77.7 % 75.7 % 74.3 % 69.0 % 65.2 % 62.4 %
Risk-weighted assets $ 3,693,390 3,711,179 3,639,095 3,679,436 3,748,498 3,878,884
Total assets per full-time equivalent employee $ 6,538 6,373 6,384 6,349 6,229 6,389
Annualized revenues per full-time equivalent employee $ 261.3 237.7 230.4 235.0 233.1 232.4
Number of employees (full-time equivalent) 739.0 756.5 769.0 781.0 796.0 786.0
Associate retention rate (14) 89.6 % 92.4 % 93.5 % 95.2 % 97.3 % 96.6 %
 
Selected economic information (in thousands) (15):
Nashville MSA nonfarm employment 743.8 735.5 748.1 741.3 728.8 723.7
Knoxville MSA nonfarm employment 328.8 325.2 326.6 326.7 321.7 317.8
Nashville MSA unemployment 8.5 % 8.3 % 8.1 % 8.4 % 9.0 % 9.5 %
Knoxville MSA unemployment 7.7 % 7.5 % 7.3 % 7.8 % 8.1 % 8.8 %
Nashville residential median home price $ 167.1 166.8 171.0 178.0 171.3 159.4
Nashville inventory of residential homes for sale 14.0 13.0 13.3 14.9 14.9 14.1
 
This information is preliminary and based on company data available at the time of the presentation.
 
 
 
 
 
 
 
PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP SELECTED QUARTERLY FINANCIAL DATA – UNAUDITED
                       
June March December September June March
(dollars in thousands, except per share data)     2011     2011     2010     2010     2010     2010
Reconciliation of certain financial measures:
Tangible assets:
Total assets $ 4,831,333 $ 4,820,991 $ 4,909,004 $ 4,961,603 $ 4,958,478 $ 5,021,689
Less: Goodwill (244,083 ) (244,083 ) (244,090 ) (244,097 ) (244,097 ) (244,105 )
Core deposit and other intangibles   (9,273 )       (9,989 )       (10,705 )       (11,450 )       (12,194 )       (12,940 )
Net tangible assets $ 4,577,976       $ 4,566,919       $ 4,654,208       $ 4,706,056       $ 4,702,187       $ 4,764,644  
 
Tangible equity:
Total stockholders' equity $ 699,228 $ 681,226 $ 677,457 $ 686,529 $ 681,915 $ 700,261
Less: Goodwill (244,083 ) (244,083 ) (244,090 ) (244,097 ) (244,097 ) (244,105 )
Core deposit and other intangibles   (9,273 )       (9,989 )       (10,705 )       (11,450 )       (12,194 )       (12,940 )
Net tangible equity 445,872 427,154 422,662 430,982 425,624 443,216
Less: Preferred stock   (91,422 )       (91,094 )       (90,789 )       (90,455 )       (90,127 )       (89,821 )
Net tangible common equity $ 354,449       $ 336,060       $ 331,873       $ 340,527       $ 335,497       $ 353,395  
 
Ratio of tangible common equity to tangible assets   7.74 %       7.36 %       7.13 %       7.24 %       7.13 %       7.42 %
 
Tangible common equity per common share $ 10.38       $ 9.85       $ 9.80       $ 10.12       $ 10.04       $ 10.60  
 
 

Return on tangible equity (1)
  4.36 %       1.91 %       2.11 %       0.51 %       -26.27 %       -4.91 %
 

Return on tangible common equity (1)
  5.48 %       2.43 %       2.69 %       0.64 %       -33.32 %       -6.16 %
 
 
 
For the three months ended
June March December September June March
(dollars in thousands)     2011     2011     2010     2010     2010     2010
 
Sum of Net interest income and Noninterest income $ 47,605 $ 44,344 $ 44,722 $ 44,653 $ 46,266 $ 45,046
 
Noninterest expense $ 34,357 $ 34,701 $ 36,452 $ 37,774 $ 36,491 $ 36,167
Other real estate owned expense   3,826         4,334         7,874         8,522         7,411         5,402  
Noninterest expense excluding the impact of other real estate owned expense $ 30,532       $ 30,367       $ 28,578       $ 29,252       $ 29,080       $ 30,765  
 
Efficiency Ratio 72.2 % 78.3 % 81.5 % 84.6 % 78.9 % 80.3 %
 

Efficiency Ratio excluding the impact of other real estate owned expense
64.1 % 68.5 % 63.9 % 65.5 % 62.9 % 68.3 %
 
 
This information is preliminary and based on company data available at the time of the presentation.
 
 
 
 
 
 
 
PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL DATA – UNAUDITED
 
 
1. Ratios are presented on an annualized basis.
2. Net interest margin is the result of net interest income on a tax equivalent basis divided by average interest earning assets.
3. Total revenue is equal to the sum of net interest income and noninterest income.
4. Efficiency ratios are calculated by dividing noninterest expense by the sum of net interest income and noninterest income.
5. Restructured Accruing Loans include loans where the company, as a result of the borrower’s financial difficulties, has granted a credit concession to the borrower (i.e., interest only payments for a period of time, extending the maturity of the loan, etc.). These loans continue to accrue interest at the contractual rate and are considered to be troubled debt restructurings.
6. Average risk ratings are based on an internal loan review system which assigns a numeric value of 1 to 10 to all loans to commercial entities based on their underlying risk characteristics as of the end of each quarter. A “1” risk rating is assigned to credits that exhibit Excellent risk characteristics, “2” exhibit Very Good risk characteristics, “3” Good, “4” Satisfactory, “5” Acceptable or Average, “6” Watch List, “7” Criticized, “8” Classified or Substandard, “9” Doubtful and “10” Loss (which are charged-off immediately). Additionally, loans rated “8” or worse that are not nonperforming or restructured loans are considered potential problem loans. Generally, consumer loans are not subjected to internal risk ratings.
7. Annualized net loan charge-offs to average loans ratios are computed by annualizing year-to-date net loan charge-offs and dividing the result by average loans for the year-to-date period.
8. Capital ratios are for Pinnacle Financial Partners, Inc. and are defined as follows:
Equity to total assets – End of period total stockholders’ equity as a percentage of end of period assets.
Leverage – Tier one capital (pursuant to risk-based capital guidelines) as a percentage of adjusted average assets.
Tier one risk-based – Tier one capital (pursuant to risk-based capital guidelines) as a percentage of total risk-weighted assets.
Total risk-based – Total capital (pursuant to risk-based capital guidelines) as a percentage of total risk-weighted assets.
9. Book value per share computed by dividing total stockholders’ equity less preferred stock and common stock warrants by common shares outstanding.
10. Amounts are included in the statement of operations in “Gains on the sale of loans and loan participations sold”, net of commissions paid on such amounts.
11. At fair value, based on information obtained from Pinnacle’s third party broker/dealer for non-FDIC insured financial products and services.
12. Floating rate loans are those loans that are eligible for repricing on a daily basis subject to changes in Pinnacle’s prime lending rate or other factors.
13. Core deposits include all transaction deposit accounts, money market and savings accounts and all certificates of deposit issued in a denomination of less than $100,000. The ratio noted above represents total core deposits divided by total funding, which includes total deposits, FHLB advances, securities sold under agreements to repurchase, subordinated indebtedness and all other interest-bearing liabilities.
14. Associate retention rate is computed by dividing the number of associates employed at quarter-end less the number of associates that have resigned in the last 12 months by the number of associates employed at quarter-end.
15. Employment and unemployment data is from the US Dept. of Labor Bureau of Labor Statistics. Labor force data is not seasonally adjusted. The most recent quarter data presented is as of the most recent month that data is available as of the release date. The Nashville home data is from the Greater Nashville Association of Realtors.
16. Brokered deposits do not include reciprocal balances under the Certificate of Deposit Account Registry Service (CDARS).
 
 
 

Copyright Business Wire 2010

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