Pinnacle Financial Achieves Quarterly Record for Pre-Tax Net Income

Pinnacle Financial Achieves Quarterly Record for Pre-Tax Net Income

Fully diluted EPS up 86% 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 $13.4 million in the quarter ended March 31, 2013, up from net income available to common stockholders of $7.2 million for the same quarter in 2012. Net income per diluted common share was $0.39 for the quarter ended March 31, 2013, compared to net income per diluted common share of $0.21 for the quarter ended March 31, 2012, an increase of 85.7 percent.


"With our balance sheet rehabilitation largely behind us, growing the core earnings capacity of this firm is our No. 1 priority," said M. Terry Turner, Pinnacle's president and chief executive officer. "For many financial metrics, including pre-tax net income and return on average assets (ROAA), we are now operating at higher levels than ever before in the history of the firm. These results demonstrate significant core earnings growth and further validate our potential to reach our long-term profitability targets."

Growing the Core Earnings Capacity of the Firm

  • Loans at March 31, 2013 were a record $3.772 billion, an increase of $60.2 million from Dec. 31, 2012, and $434.5 million from March 31, 2012, a year-over-year growth rate of 13.0 percent.

  • Average balances of noninterest bearing deposit accounts were $952.9 million in the first quarter of 2013, down 2.6 percent from the fourth quarter of 2012 and up 35.8 percent over the same quarter last year.

  • Revenues excluding securities gains for the quarter ended March 31, 2013 were a record $54.7 million, compared to $53.4 million last quarter and $49.5 million for the same quarter last year. Revenues excluding securities gains for the quarter ended March 31, 2013 were up 2.4 percent on a linked-quarter basis and 10.8 percent over the same quarter last year.

  • Net interest margin increased for the 10th consecutive quarter to 3.90 percent for the quarter ended March 31, 2013, up from 3.80 percent last quarter and from 3.74 percent for the quarter ended March 31, 2012.

  • The firm's efficiency ratio for the quarter ended March 31, 2013, was 59.4 percent compared to 63.0 percent last quarter and 72.4 percent for the same quarter last year. The firm's efficiency ratio, excluding the $721.0 thousand in ORE expense and $876.5 thousand of charges related to the restructuring of $35.0 million of FHLB advances, was 56.4 percent for the first quarter of 2013.

  • Pre-tax pre-provision net income was $22.2 million for the quarter ended March 31, 2013, up 8.4 percent over the last quarter of 2012 and 63.0 percent over the same quarter last year.

"Our strategy to achieve our long-term profitability targets centers on our ability to produce continued meaningful loan and revenue growth with our existing infrastructure," Turner said. "Despite another quarter of significant loan pay-downs, we were able to increase our net loans by $60.2 million during the first quarter. That's a 13 percent year-over-year increase, slightly better than the cumulative annual growth rate required to achieve the three-year target we originally published in the fourth quarter of 2011.

"Excluding securities gains our first quarter 2013 top-line revenues represent a record for our firm. We expect to continue increasing our revenues while attempting to reduce the increases in our expenses. Therefore, we continue to believe a 1.10 to 1.30 percent ROAA target remains an appropriate profitability target for this firm."

OTHER FIRST QUARTER 2013 HIGHLIGHTS:

  • Revenue growth

    • Net interest income for the quarter ended March 31, 2013, was $42.8 million, compared to $42.2 million in the fourth quarter of 2012 and $39.5 million for the first quarter of 2012. Net interest income for the first quarter of 2013 was up 8.4 percent year over year and at its highest quarterly level since the firm's founding in 2000.

    • Noninterest income for the quarter ended March 31, 2013, was $11.9 million, compared to $13.1 million for the fourth quarter of 2012 and $9.9 million for the same quarter last year. Excluding securities gains, noninterest income was up 7.03 percent on a linked-quarter basis, 21.0 percent over the same quarter last year and at its highest quarterly level since the firm's founding.

      • Gains on mortgage loans sold, net of commissions, were $1.81 million during the first quarter of 2013, compared to $1.77 million during the fourth quarter of 2012 and $1.49 million during the first quarter of 2012.

      • Other noninterest income for the first quarter of 2013 increased by $709,000 over the fourth quarter of 2012 and by $1.19 million over the first quarter of last year. These increases were primarily attributable to increased interchange revenues and swap fees on commercial lending opportunities.

"We are extremely pleased with a 21 percent annual growth rate for noninterest income exclusive of securities gains," said Harold R. Carpenter, Pinnacle's chief financial officer. "Much like the industry as a whole, we have enjoyed the benefit of higher than normal revenues from mortgage origination due to elevated mortgage refinance levels. Nevertheless, the principal drivers of our growth in noninterest income have been deposit and wealth management fees, which we believe to be more sustainable over the long term than noninterest income attributable to the mortgage refinance market.

"We experienced a significant increase in our net interest margin this quarter due primarily to increases in average loan balances and continued reductions in funding costs. These positives were offset in part by a decrease in loan yields, which we expect will continue to be a challenge for all banks in coming quarters. Our current margin forecast for 2013 of 3.70 to 3.80 percent is consistent with the margin expectations that we outlined at the end of last quarter."

  • Noninterest and income tax expense

    • Noninterest expense for the quarter ended March 31, 2013, was $32.4 million, compared to $34.9 million in the fourth quarter of 2012 and $35.8 million in the first quarter of 2012.

      • Salaries and employee benefits costs were relatively flat from the fourth quarter of 2012 and decreased 1.11 percent from the same period last year.

      • Other real estate expenses were $721 thousand in the first quarter of 2013, compared to $1.36 million in the fourth quarter of 2012 and $4.68 million in the first quarter of 2012.

    • Income tax expense was $6.60 million for the first quarter of 2013, compared to $4.2 million in the first quarter of 2012 and $6.28 million in the fourth quarter of 2012, resulting in an effective tax rate for the first quarter of 2013 of 32.9 percent.

Carpenter also noted that the firm was diligently managing its expense infrastructure and 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 $2.76 million from Dec. 31, 2012, a linked-quarter reduction of 6.7 percent and the 11th consecutive quarterly reduction. Nonperforming assets were 1.02 percent of total loans and ORE at March 31, 2013, compared to 2.28 percent for the same quarter last year and 1.11 percent last quarter.

    • Classified assets as a percentage of Tier 1 capital plus allowance were 26.4 percent at March 31, 2013, compared to 29.4 percent last quarter and 39.3 percent for the same quarter last year.

    • Allowance for loan losses represented 1.84 percent of total loans at March 31, 2013, compared to 1.87 percent at Dec. 31, 2012, and 2.14 percent at March 31, 2012. The ratio of the allowance for loan losses to nonperforming loans increased to 317.9 percent at March 31, 2013, from 304.2 percent at Dec. 31, 2012, and 166.6 percent at March 31, 2012.

      • Net charge-offs were $2.18 million for the quarter ended March 31, 2013, compared to $3.63 million for the quarter ended March 31, 2012, and $2.16 million for the fourth quarter of 2012. Annualized net charge-offs for the quarter ended March 31, 2013, were 0.24 percent compared to 0.45 percent for the quarter ended March 31, 2012.

      • Provision for loan losses increased from $1.03 million for the first quarter of 2012 to $2.17 million for the first quarter of 2013.

Pinnacle reported nonaccrual loan inflows of $8.4 million for the first quarter of 2013, compared to $5.9 million in the fourth quarter of 2012 and $14.3 million for the first quarter of 2012. Nonaccrual loan resolutions were $8.9 million in the first quarter of 2013, compared to $19.1 million in the fourth quarter of 2012 and $15.1 million in the first quarter of 2012.

"With respect to credit quality, we continued to see improvement in the first quarter on virtually all key measures," Carpenter said. "Having largely completed the rehabilitation of our loan portfolio, our current belief is that we will continue to experience modest improvement in our credit metrics over the remainder of this year."

WEBCAST AND CONFERENCE CALL INFORMATION

Pinnacle will host a webcast and conference call at 8:30 a.m. (CDT) on April 16, 2013, to discuss first 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 $5.1 billion in assets at March 31, 2013. At March 31, 2013, Pinnacle is the second-largest bank holding company headquartered in Tennessee, with 29 offices in eight Middle Tennessee counties and three offices in Knoxville.

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 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 currently proposed 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. 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

March 31, 2013

December 31, 2012

ASSETS

Cash and noninterest-bearing due from banks

$

57,906,350

$

51,946,542

Interest-bearing due from banks

38,860,678

111,535,083

Federal funds sold and other

2,792,238

1,807,044

Cash and cash equivalents

99,559,266

165,288,669

Securities available-for-sale, at fair value

683,545,006

706,577,806

Securities held-to-maturity (fair value of $40,376,745 and $583,212 at March 31, 2013 and December 31, 2012, respectively)

40,458,642

574,863

Mortgage loans held-for-sale

30,326,709

41,194,639

Loans

3,772,363,758

3,712,162,430

Less allowance for loan losses

(69,411,493

)

(69,417,437

)

Loans, net

3,702,952,265

3,642,744,993

Premises and equipment, net

75,760,671

75,804,895

Other investments

27,311,943

26,962,890

Accrued interest receivable

16,940,917

14,856,615

Goodwill

244,011,793

244,040,421

Core deposit and other intangible assets

4,582,286

5,103,273

Other real estate owned

16,802,183

18,580,097

Other assets

128,683,433

98,819,455

Total assets

$

5,070,935,114

$

5,040,548,616

LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits:

Noninterest-bearing

$

977,495,990

$

985,689,460

Interest-bearing

788,631,493

760,786,247

Savings and money market accounts

1,564,517,135

1,662,256,403

Time

572,250,233

606,455,873

Total deposits

3,902,894,851

4,015,187,983

Securities sold under agreements to repurchase

129,099,508

114,667,475

Federal Home Loan Bank advances

200,796,066

75,850,390

Subordinated debt and other borrowings

105,533,292

106,158,292

Accrued interest payable

1,235,441

1,360,598

Other liabilities

39,942,214

48,252,519

Total liabilities

4,379,501,372

4,361,477,257

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; 35,022,487 shares and 34,696,597 shares issued and outstanding at March 31, 2013 and December 31, 2012, respectively

35,022,487

34,696,597

Additional paid-in capital

544,619,717

543,760,439

Retained earnings

100,834,814

87,386,689

Accumulated other comprehensive income, net of taxes

10,956,724

13,227,634

Stockholders' equity

691,433,742

679,071,359

Total liabilities and stockholders' equity

$

5,070,935,114

$

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 Ended

March 31,

2013

2012

Interest income:

Loans, including fees

$

41,514,213

$

38,637,719

Securities

Taxable

3,670,934

4,929,284

Tax-exempt

1,656,408

1,703,146

Federal funds sold and other

314,772

553,939

Total interest income

47,156,327

45,824,088

Interest expense:

Deposits

3,412,396

4,827,476

Securities sold under agreements to repurchase

77,816

155,576

Federal Home Loan Bank advances and other borrowings

907,641

1,337,031

Total interest expense

4,397,853

6,320,083

Net interest income

42,758,474

39,504,005

Provision for loan losses

2,172,404

1,034,245

Net interest income after provision for loan losses

40,586,070

38,469,760

Noninterest income:

Service charges on deposit accounts

2,480,244

2,323,962

Investment services

1,792,640

1,646,778

Insurance sales commissions

1,393,304

1,287,560

Gain on mortgage loans sold, net

1,813,488

1,494,472

Gain on sale of investment securities, net

-

113,600

Trust fees

944,332

795,435

Other noninterest income

3,478,348

2,287,531

Total noninterest income

11,902,356

9,949,338

Noninterest expense:

Salaries and employee benefits

19,572,356

19,792,566

Equipment and occupancy

5,113,050

5,008,655

Other real estate expense

720,962

4,676,064

Marketing and other business development

790,671

785,325

Postage and supplies

591,488

563,294

Amortization of intangibles

520,987

686,067

Other noninterest expense

5,130,495

4,307,735

Total noninterest expense

32,440,009

35,819,706

Income before income taxes

20,048,417

12,599,392

Income tax expense

6,600,292

4,234,438

Net income

13,448,125

8,364,954

Preferred dividends

-

900,519

Accretion on preferred stock discount

-

258,647

Net income available to common stockholders

$

13,448,125

$

7,205,788

Per share information:

Basic net income per common share available to common stockholders

$

0.40

$

0.21

Diluted net income per common share available to common stockholders

$

0.39

$

0.21

Weighted average shares outstanding:

Basic

33,987,265

33,811,871

Diluted

34,206,202

34,423,898

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

March

December

September

June

March

December

(dollars in thousands)

2013

2012

2012

2012

2012

2011

Balance sheet data, at quarter end:

Commercial real estate - mortgage loans

$

1,278,639

1,178,196

1,167,136

1,167,068

1,123,690

1,110,962

Consumer real estate - mortgage loans

675,632

679,927