Aggressively Dealing with Credit Issues

  • The allowance for loan losses represented 2.02 percent of total loans at June 30, 2012, compared to 2.14 percent at March 31, 2012, and 2.40 percent at June 30, 2011.
    • Net charge-offs were $2.4 million for the quarter ended June 30, 2012, compared to $8.6 million for the quarter ended June 30, 2011, and $3.6 million for the first quarter of 2012.
    • Provision for loan losses expense decreased from $6.6 million for the second quarter of 2011 to $0.6 million for the second quarter of 2012. The results reflect the overall improvement in the credit quality of the loan portfolio compared to the same period in 2011 and the reduction in net charge-offs.
  • Nonperforming assets declined by $10.6 million from March 31, 2012, a linked-quarter reduction of 13.8 percent and the eighth consecutive quarterly reduction.
    • Nonperforming assets were 1.91 percent of total loans plus other real estate at June 30, 2012, compared to 2.28 percent at March 31, 2012, and 3.44 percent at June 30, 2011. Pinnacle resolved $22.5 million in nonperforming assets during the second quarter of 2012, compared to resolutions of $25.3 million during the first quarter of 2012.
    • Nonperforming loans declined by $2.0 million during the second quarter of 2012, a linked-quarter reduction of 4.7 percent and the ninth consecutive quarterly reduction. Nonperforming loans are down 31.7 percent from June 30, 2011. Nonperforming loan inflows were $11.9 million during the second quarter of 2012, a linked-quarter decrease of 16.0 percent. Nonperforming loan inflows were also down 31.7 percent from the second quarter a year ago.
    • The ratio of the allowance for loan losses to nonperforming loans increased to 170.5 percent at June 30, 2012, from 166.6 percent at March 31, 2012, and 128.9 percent at June 30, 2011.
    • Other real estate also declined by 25.2 percent or $8.6 million during the second quarter of 2012, inclusive of $2.5 million in property foreclosures.
  • Troubled debt restructurings increased by $3.8 million between March 31, 2012 and June 30, 2012, primarily due to two commercial real estate projects.
  • Potential problem loans, which are classified loans that continue to accrue interest, declined by $6.6 million from March 31, 2012, a linked-quarter reduction of 5.6 percent. Potential problem loans are down from $148.5 million at June 30, 2011, to $110.6 million at June 30, 2012, a decrease of 25.5 percent. Potential problem loans are down by 65.2 percent from their peak in June 2010.
  • Net charge-offs for the quarter ended June 30, 2012, were $2.4 million, an annualized net charge-off rate of 0.28 percent. Annualized net charge-offs year-to-date through June 30, 2012, were 0.36 percent, compared to an annualized rate of 1.14 percent for the same period in the prior year.

“One of our primary priorities for the last three years has been to rehabilitate the balance sheet and return to normalized credit metrics,” Turner said. “With an annualized net charge-off rate of 0.28 percent and the ratio of nonperforming assets to total loans plus OREO of less than 2.0 percent, we continued our forward progress during the second quarter.”

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