Pinnacle Financial Reports Fully-Diluted EPS up 83% Year-over-Year

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Pinnacle Financial Reports Fully-Diluted EPS up 83% Year-over-Year

Loan growth up 14.0% over same quarter last year


NASHVILLE, Tenn.--(BUSINESS WIRE)-- Pinnacle Financial Partners, Inc. (Nasdaq/NGS: PNFP) today reported net income available to common stockholders of $14.3 million for the quarter ended June 30, 2013, up from net income available to common stockholders of $7.8 million for the same quarter in 2012. Net income per diluted common share was $0.42 for the quarter ended June 30, 2013, compared to net income per diluted common share of $0.23 for the quarter ended June 30, 2012, an increase of 82.6 percent.

Pinnacle also reported net income available to common stockholders of $27.8 million for the six months ended June 30, 2013, up from net income available to common stockholders of $15.0 million for the same six-month period in 2012. Net income per diluted common share was $0.81 for the six months ended June 30, 2013, compared to net income per diluted common share of $0.44 for the six months ended June 30, 2012, an increase of 84.1 percent.

"Growing the core earnings capacity of our firm continues to be our No. 1 priority," said M. Terry Turner, Pinnacle's president and chief executive officer. "Our second quarter loan growth and, just as importantly, the growth we experienced in demand deposit accounts, demonstrate our ability to continue to gather clients and, consequently, to grow loans, core deposits and revenues in what we believe are two of the best banking markets in the country."

GROWING THE CORE EARNINGS CAPACITY OF THE FIRM:

  • Loans at June 30, 2013, were a record $3.925 billion, an increase of $213.2 million from Dec. 31, 2012, and $480.7 million from June 30, 2012, a year-over-year growth rate of 14.0 percent.
  • Average balances of noninterest bearing deposit accounts were $1.0 billion in the second quarter of 2013, up 6.3 percent from the first quarter of 2013 and up 34.0 percent over the same quarter last year.

  • Revenues excluding securities gains and losses for the quarter ended June 30, 2013, were a record $55.0 million, an increase from $54.7 million last quarter and up 10 percent over the $50.0 million in revenues excluding securities gains and losses for the same quarter last year.
  • Consistent with previously disclosed expectations, the firm's net interest margin decreased to 3.77 percent for the quarter ended June 30, 2013, down from 3.90 percent last quarter but up from 3.76 percent for the quarter ended June 30, 2012.
  • The firm's efficiency ratio for the quarter ended June 30, 2013, was 56.2 percent compared to 59.4 percent last quarter and 67.7 percent for the same quarter last year. The firm's efficiency ratio, excluding the $1.39 million in ORE expense and $771,000 in noncredit related loan losses, was 52.9 percent for the second quarter of 2013.
  • Pre-tax pre-provision net income was $24.1 million for the quarter ended June 30, 2013, up 8.3 percent over the first quarter of 2013 and 48.7 percent over the same quarter last year.

"We believe the loan growth we experienced in the second quarter puts us in a great position to achieve our 11.5 percent compound annual growth targets by year end 2014," Turner said. "Additionally, we consider the operating account the single most important product in establishing a high-quality commercial banking relationship. When you have the client's operating account, we believe you have the primary banking relationship. Consequently, we are pleased to report over $1.0 billion in average noninterest bearing account balances in the second quarter, an increase of 34.0 percent over average balances for the same quarter last year.

"Also, excluding securities gains and losses, our second quarter 2013 top-line revenues represent another record for our firm. We expect to continue increasing our revenues for the foreseeable future while essentially maintaining our expense base, thus increasing our operating leverage. Having now reached the low end of our targeted range, we believe a 1.10 to 1.30 percent ROAA target remains an appropriate profitability target for this firm."

OTHER SECOND QUARTER 2013 HIGHLIGHTS:

  • Revenue growth
    • Net interest income for the quarter ended June 30, 2013, was $43.6 million, compared to $42.8 million in the first quarter of 2013 and $40.2 million for the second quarter of 2012. Net interest income for the second quarter of 2013 was up 8.5 percent year-over-year and is at its highest quarterly level since the firm's founding in 2000.
    • Noninterest income for the quarter ended June 30, 2013, was $11.3 million, compared to $11.9 million for the first quarter of 2013 and $9.9 million for the same quarter last year. Excluding securities gains and losses, noninterest income was down 4.6 percent on a linked-quarter basis but was up 15.7 percent over the same quarter last year.
      • Gains on mortgage loans sold, net of commissions, were $1.95 million during the second quarter of 2013, compared to $1.86 million during the first quarter of 2013 and $1.46 million during the second quarter of 2012. During the second quarter of 2013, the volume of "purchase money" transactions (home purchase transactions versus refinance transactions) represented 49 percent of total volumes compared to 32 percent for the first quarter of 2013. "Purchase money" transactions represented approximately 31 percent of mortgage volumes in 2012.
      • Insurance sales commissions decreased in the second quarter compared to the first quarter primarily due to the impact of annual carrier incentive awards that are typically received in the first quarter of each year.
      • Other noninterest income for the second quarter of 2013 decreased by $458,000 from the first quarter of 2013 but increased by $586,000 over the second quarter of last year. In comparison to the first quarter of 2013, increases from interchange revenues were offset by a loss on an interest rate swap arrangement of $350,000 and a $421,000 non-cash charge due to the write-off of an impaired servicing asset. Both of these losses were attributable to the resolution of previously classified troubled loans.

"Operationally, we had a very sound quarter," said Harold R. Carpenter, Pinnacle's chief financial officer. "We grew our core deposit base as more clients in our targeted segments believe our value proposition offers more benefits and higher service quality than the large regional and national franchises.

"Also, as we have mentioned for the last several quarters, we anticipated a decrease in our net interest margin in the second quarter of 2013. As compared to the prior quarter, loan yields decreased by 17 basis points in the second quarter, which was partially offset by decreases in funding costs of seven basis points. Our current net interest margin forecast for 2013 of 3.70 to 3.80 percent remains consistent with margin expectations that we outlined at the end of last quarter."

Carpenter also noted that the increases in the intermediate and longer-term treasury rates over the last several weeks will impact all banks if they are sustained over an extended period of time.

"Since the firm is predominately short-term funded, we do not expect funding costs to increase materially in the near term," Carpenter said. "Additionally, we do not anticipate immediate increases in rates for fixed rate loans given the competitive market for high quality borrowers. Irrespective of these factors, it will be the focus of the firm to increase quarterly revenues by growing our client base and associated loans and deposits."

  • Noninterest and income tax expense
    • Noninterest expense for the quarter ended June 30, 2013, was $30.9 million, compared to $32.4 million in the first quarter of 2013 and $33.9 million in the second quarter of 2012.
      • Salaries and employee benefits costs were up from the first quarter of 2013 by approximately $1.00 million and by $1.33 million from the same period last year due to increased associate incentive accruals.
      • Other real estate expenses were $1.39 million in the second quarter of 2013, compared to $721,000 in the first quarter of 2013 and $3.1 million in the second quarter of 2012.
    • Income tax expense was $6.98 million for the second quarter of 2013, compared to $6.60 million in the first quarter of 2013 and $5.11 million in the second quarter of 2012, resulting in an effective tax rate for the second quarter of 2013 of 32.8 percent.

Carpenter noted that, in the second quarter, other expenses were impacted by a $2.0 million reversal of previously recorded allowance for off-balance sheet exposure specifically attributable to a letter of credit that funded during the second quarter of 2013. Accordingly, the $2.0 million reserve reversal was offset by an increase in provision for loan losses of an equivalent amount upon loan funding. Ultimately, during the second quarter of 2013, the firm charged-off approximately $3.0 million of this borrower's obligation as a final resolution of this troubled loan.

Carpenter reaffirmed that, exclusive of ORE expenses and FHLB restructuring charges, he anticipated expense increases for 2013 of 2 to 3 percent over 2012.

  • Asset Quality
    • Nonperforming assets declined by $2.09 million from March 31, 2013, a linked-quarter reduction of 5.40 percent and the 12th consecutive quarterly reduction. Nonperforming assets were 0.93 percent of total loans and ORE at June 30, 2013, compared to 1.91 percent for the same quarter last year and 1.02 percent last quarter.
    • Classified assets as a percentage of Tier 1 capital plus allowance were 23.3 percent at June 30, 2013, compared to 26.4 percent at March 31, 2013, and 37.8 percent at June 30, 2012.
    • Allowance for loan losses represented 1.75 percent of total loans at June 30, 2013, compared to 1.84 percent at March 31, 2013, and 2.02 percent at June 30, 2012. The ratio of the allowance for loan losses to nonperforming loans increased to 334.1 percent at June 30, 2013, from 317.9 percent at March 31, 2013, and 170.5 percent at June 30, 2012.
      • Net charge-offs were $3.49 million for the quarter ended June 30, 2013, compared to $2.40 million for the quarter ended June 30, 2012, and $2.18 million for the first quarter of 2013. Annualized net charge-offs for the quarter ended June 30, 2013, were 0.36 percent compared to 0.28 percent for the quarter ended June 30, 2012. Annualized net charge-offs for the six months ended June 30, 2013, were 0.30 percent, well within the firm's long-term profitability target for net charge-offs.
      • Gross charge-offs for the quarter ended June 30, 2013, were $7.8 million and included the $3.0 million charge off to a single borrower referred to above. Recoveries for the quarter ended June 30, 2013, amounted to $4.3 million and included a recovery of approximately $2.9 million from an insurance settlement related to a fraud loss the firm experienced in 2011.
      • Provision for loan losses increased from $634,000 for the second quarter of 2012 to $2.77 million for the second quarter of 2013.

"We expect continued modest improvement in credit quality metrics during the remainder of 2013," Carpenter said. "Our special assets group continues to have a bias toward accelerated disposition of troubled assets. We expect our net charge-off ratio will range between 0.25 percent to 0.35 percent in 2013 compared to last year's net charge-off ratio of 0.29 percent."

WEBCAST AND CONFERENCE CALL INFORMATION

Pinnacle will host a webcast and conference call at 8:30 a.m. (CDT) on July 17, 2013, to discuss second quarter 2013 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 almost $5.4 billion in assets at June 30, 2013. At June 30, 2013, Pinnacle is the second-largest bank holding company headquartered in Tennessee, with 29 offices in eight Middle Tennessee counties and four offices in Knoxville.

Additional information concerning Pinnacle, which was recently added to the NADSAQ Financial-100 Index, 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 inability of Pinnacle Financial to 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 adverse conditions 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 ability to retain large, uninsured deposits with the expiration of the FDIC's transaction account guarantee program (xi) the development of any new market other than Nashville or Knoxville; (xii) a merger or acquisition; (xiii) any matter that would cause Pinnacle Financial to conclude that there was impairment of any asset, including intangible assets; (xiv) the ability to attract additional financial advisors or to attract customers from other financial institutions; (xv) further deterioration in the valuation of other real estate owned and increased expenses associated therewith; (xvi) inability to comply with regulatory capital requirements, including those resulting from recently adopted changes to capital calculation methodologies and required capital maintenance levels; and, (xvii) 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. 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 22, 2013 and Pinnacle Financial's most recent quarterly report on Form 10-Q filed with the Securities and Exchange Commission on May 3, 2013. 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, 2013    December 31, 2012 

ASSETS

Cash and noninterest-bearing due from banks$70,623,888$51,946,542
Interest-bearing due from banks162,365,672111,535,083
Federal funds sold and other  8,181,484      1,807,044  
Cash and cash equivalents241,171,044165,288,669
 
Securities available-for-sale, at fair value687,832,401706,577,806

Securities held-to-maturity (fair value of $39,010,480 and $583,212 at June 30, 2013 and December 31, 2012, respectively)

40,056,711574,863
Mortgage loans held-for-sale27,962,67541,194,639
 
Loans3,925,364,5863,712,162,430
Less allowance for loan losses  (68,694,868)     (69,417,437) 
Loans, net3,856,669,7183,642,744,993
 
Premises and equipment, net75,840,85375,804,895
Other investments30,371,21826,962,890
Accrued interest receivable15,654,01814,856,615
Goodwill243,900,240244,040,421
Core deposit and other intangible assets4,334,1005,103,273
Other real estate owned15,991,83518,580,097
Other assets  133,383,112      98,819,455  
Total assets $5,373,167,925     $5,040,548,616  
 

LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits:
Noninterest-bearing$1,098,887,282$985,689,460
Interest-bearing817,562,583760,786,247
Savings and money market accounts1,607,689,4571,662,256,403
Time  572,438,682      606,455,873  
Total deposits4,096,578,0044,015,187,983
Securities sold under agreements to repurchase117,345,727114,667,475
Federal Home Loan Bank advances325,762,33375,850,390
Subordinated debt and other borrowings99,908,292106,158,292
Accrued interest payable1,037,1501,360,598
Other liabilities  35,967,600      48,252,519  
Total liabilities4,676,599,1064,361,477,257
 

Stockholders' equity:

Preferred stock, no par value; 10,000,000 shares authorized; no shares issued and outstanding--

Common stock, par value $1.00; 90,000,000 shares authorized; 35,073,763 shares and 34,696,597 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively

35,073,76334,696,597
Additional paid-in capital545,963,974543,760,439
Retained earnings115,145,34687,386,689
Accumulated other comprehensive income, net of taxes  385,736      13,227,634  
Stockholders' equity  696,568,819      679,071,359  
Total liabilities and stockholders' equity $5,373,167,925     $5,040,548,616  
 
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 INCOME - UNAUDITED
               
Three Months EndedSix Months Ended
June 30,June 30,
     2013    2012    2013    2012 
Interest income:
Loans, including fees$42,149,149$39,288,048$83,663,362$77,925,767
Securities
Taxable3,650,7664,453,9567,321,7009,383,240
Tax-exempt1,483,9651,647,8523,140,3733,350,998
Federal funds sold and other  260,440      563,638     575,212      1,117,577 
Total interest income  47,544,320      45,953,494     94,700,647      91,777,582 
 
Interest expense:
Deposits2,955,9854,298,8496,368,3819,126,325
Securities sold under agreements to repurchase70,823115,450148,639271,026
Federal Home Loan Bank advances and other borrowings  918,762      1,354,132     1,826,403      2,691,163 
Total interest expense  3,945,570      Read Full Story

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