PNFP Pinnacle Financial Partners Inc

Loans increased 11.4 percent over last year

Loan, core deposit and revenue growth produce operating leverage

Pinnacle Financial Partners, Inc. (Nasdaq/NGS: PNFP) reported net income per diluted common share of $0.52 for the quarter ended Sept. 30, 2014, compared to net income per diluted common share of $0.42 for the quarter ended Sept. 30, 2013, an increase of 23.8 percent. Net income per diluted common share was $1.48 for the nine months ended Sept. 30, 2014, compared to net income per diluted common share of $1.23 for the nine months ended Sept. 30, 2013, an increase of 20.3 percent.

“Our performance in the third quarter of 2014 represents our seventh consecutive quarter of record earnings per share for the shareholders of our firm,” said M. Terry Turner, Pinnacle’s president and chief executive officer. “We continue to experience strong organic loan growth as well as strong growth in revenues and profitability. End-of-period loan balances increased by 11.4 percent year over year, while average non-interest bearing deposits increased by 19.7 percent during the same period. Our third quarter results place us in great position to achieve our 2014 growth targets.”

GROWING THE CORE EARNINGS CAPACITY OF THE FIRM:

• Loans at Sept. 30, 2014 were a record $4.421 billion, an increase of $105.7 million from June 30, 2014. Loans increased $451.9 million from Sept. 30, 2013, a year-over-year growth rate of 11.4 percent.
• Average balances of noninterest-bearing deposit accounts were $1.317 billion in the third quarter of 2014 and represented approximately 28.3 percent of total average deposit balances for the quarter, another record for the firm. Third quarter 2014 average noninterest-bearing deposits increased 19.7 percent over the same quarter last year.
• Revenues (excluding securities gains and losses) for the quarter ended Sept. 30, 2014 were a record $62.4 million, an increase of $2.6 million from $59.8 million in the second quarter of 2014. Revenues (excluding securities gains and losses) increased 8.7 percent over the same quarter last year.
• Return on average assets was 1.25 percent for the third quarter of 2014, compared to 1.21 percent for the second quarter of 2014 and 1.09 percent for the same quarter last year. Third quarter 2014 return on average tangible equity amounted to 13.69 percent, compared to 13.50 percent for the second quarter of 2014 and 12.71 percent for the same quarter last year.

“We remain optimistic about our ability to achieve our 2014 end-of-year loan targets,” Turner said. “Our 2014 third quarter annualized net loan growth rate of 9.8 percent exceeded our 2013 third quarter annualized net loan growth rate of 4.5 percent, providing further evidence of the achievability of our three-year growth targets for the period ending December 2014. As our focus turns to the next three-year period, we expect firms that are capable of efficient and effective core deposit acquisition will be the banking firms ultimately rewarded by investors. For that reason, we are pleased with the nearly 20 percent annual growth rate in demand deposits.”

OTHER THIRD QUARTER 2014 HIGHLIGHTS:

• Revenue growth
  • Net interest income for the quarter ended Sept. 30, 2014 was $49.5 million, compared to $47.2 million for the second quarter of 2014 and $44.6 million for the third quarter of 2013.
    • The firm’s net interest margin increased to 3.79 percent for the quarter ended Sept. 30, 2014, up from 3.71 percent last quarter and 3.72 percent for the quarter ended Sept. 30, 2013.
  • Noninterest income for the quarter ended Sept. 30, 2014 was $12.9 million, compared to $12.6 million for the second quarter of 2014 and $11.4 million for the same quarter last year.
    • Other fees increased by $512,000 between the second and third quarters of 2014 due to several factors, including gains on other investments and increased interchange revenues. Other fees decreased $702,000 between the quarters ended Sept. 30, 2014 and 2013 primarily due to a $1.1 million gain on the sale of the government guaranteed portion of a loan in the third quarter of 2013.

“Our net interest margin improvement was primarily attributable to higher loan yields and continued lower funding costs,” said Harold R. Carpenter, Pinnacle’s chief financial officer. “Average loan yields for the third quarter of 2014 increased by seven basis points compared to the second quarter of 2014, while our cost of funds decreased by one basis point. Loan yields increased due to several factors, including recognition of interest income on loans previously classified as nonaccrual and the favorable impact of certain hedging activities entered into during the second quarter of 2014. Looking to the fourth quarter, we believe our net interest income should expand based on volume increases, while our net interest margin will likely contract modestly but remain well within our previous guidance.”

• Noninterest expense
  • Noninterest expense for the quarter ended Sept. 30, 2014 was $34.4 million, compared to $33.9 million in the second quarter of 2014 and $33.3 million in the same quarter last year.
    • Equipment and occupancy expense increased by $560,000 compared to the second quarter of 2014, primarily due to a $460,000 write-off of equipment resulting from the decision to outsource certain services to a third party provider.
    • Other real estate owned expenses (OREO) were $417,000 in the third quarter of 2014, compared to $226,000 in the second quarter of 2014 and $699,000 in the same quarter last year.
    • Other noninterest expense decreased by $147,000 in the third quarter of 2014 compared to the second quarter of 2014, and by $660,000 compared to the third quarter of 2013, primarily due to costs associated with the resolution of a legal matter during the third quarter of 2013.

“Our third quarter results reflect an efficiency ratio of 55.0 percent, which is another record for the firm,” Carpenter said. “Our goal is to continue to increase the operating leverage of our firm primarily through increased revenues while maintaining effective cost controls. That said, we believe that in order to remain a high performing franchise, prudent management of our expense base will continue to be a requirement.”

• Asset quality
  • Nonperforming assets were $34.0 million at Sept. 30, 2014, compared to $28.6 million at June 30, 2014 and $35.5 million at Sept. 30, 2013. Nonperforming assets were 0.77 percent of total loans and ORE at Sept. 30, 2014, compared to 0.66 percent at June 30, 2014 and 0.89 percent at Sept. 30, 2013.
  • The allowance for loan losses represented 1.50 percent of total loans at Sept. 30, 2014, compared to 1.55 percent at June 30, 2014 and 1.70 percent at Sept. 30, 2013. The ratio of the allowance for loan losses to nonperforming loans was 305.6 percent at Sept. 30, 2014, compared to 426.6 percent at June 30, 2014 and 336.6 percent at Sept. 30, 2013.
    • Net charge-offs were $1.6 million for the quarter ended Sept. 30, 2014, compared to $890,000 for the second quarter of 2014 and $2.1 million for the quarter ended Sept. 30, 2013. Annualized net charge-offs as a percentage of average loans for the quarter ended Sept. 30, 2014 were 0.14 percent, compared to 0.21 percent for the quarter ended Sept. 30, 2013.
    • Provision for loan losses increased from $685,000 for the third quarter of 2013 to $851,000 for the third quarter of 2014. The provision was $254,000 for the second quarter of 2014.

“Total nonperforming loans increased by $6.0 million between Sept. 30, 2014 and June 30, 2014,” Carpenter said. “At Sept. 30, 2014, approximately $15.6 million of the $21.6 million in nonperforming loans are performing pursuant to their contractual terms. We expect that our credit metrics will continue to be in the top quartile of most peer groups and provide us with additional credit leverage for the remainder of this year and next.”

BOARD OF DIRECTORS DECLARES DIVIDEND

On Oct. 21, 2014, Pinnacle’s Board of Directors also declared an $0.08 per share cash dividend to be paid on Nov. 28, 2014 to common shareholders of record as of the close of business on Nov. 7, 2014. The amount and timing of any future dividend payments to common shareholders will be subject to the discretion of Pinnacle’s Board of Directors.

WEBCAST AND CONFERENCE CALL INFORMATION

Pinnacle will host a webcast and conference call at 8:30 a.m. (CDT) on Oct. 22, 2014 to discuss third quarter 2014 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, trust, mortgage and insurance products and services designed for businesses and their owners and individuals interested in a comprehensive relationship with their financial institution.

The firm began operations in a single downtown Nashville location in October 2000 and has since grown to approximately $5.9 billion in assets at Sept. 30, 2014. At Sept. 30, 2014, Pinnacle is the second-largest bank holding company headquartered in Tennessee, with 29 offices in eight Middle Tennessee counties and four offices in Knoxville. Additionally, Great Place to Work® named Pinnacle one of the best workplaces in the United States on its 2014 Best Small & Medium Workplaces list published in FORTUNE magazine. The American Banker also recognized Pinnacle as the best bank to work for in the country.

Additional information concerning Pinnacle, which is included in the NASDAQ Financial-100 Index, can be accessed at www.pnfp.com.

Certain of the statements in this quarterly report on Form 10-Q 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; (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 on loans or deposits; (ix) the results of regulatory examinations; (x) the ability to retain large, uninsured deposits; (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) reduced ability to attract additional financial advisors (or failure of such advisors to cause their clients to switch to Pinnacle Financial) or otherwise 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 changes to capital calculation methodologies and required capital maintenance levels; (xvii) risks associated with litigation, including the applicability of insurance coverage; (xviii) approval of the declaration of any dividend by Pinnacle Financial’s board of directors, (xix) the vulnerability of our network and online banking portals to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss and other security breaches, (xx) the possibility of increased compliance costs as a result of increased regulatory oversight and the development of additional banking products for our corporate and consumer clients, and (xxi) 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 25, 2014 and Pinnacle Financial’s most recent quarterly report on Form 10-Q filed with the Securities and Exchange Commission on August 1, 2014. 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 report, whether as a result of new information, future events or otherwise.

          PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS – UNAUDITED                   September 30, 2014     June 30, 2014     December 31, 2013

ASSETS

Cash and noninterest-bearing due from banks $ 64,743,501 $ 91,575,519 $ 79,785,004 Interest-bearing due from banks 148,068,613 114,865,408 124,509,486 Federal funds sold and other   4,757,438         4,667,086         4,644,247   Cash and cash equivalents 217,569,552 211,108,013 208,938,737   Securities available-for-sale, at fair value 714,920,906 743,528,294 693,456,314

Securities held-to-maturity (fair value of $38,112,282, $38,290,464, and $38,817,467 at September 30, 2014, June 30, 2014 and December 31, 2013, respectively)

38,106,986 38,537,545 39,795,649 Mortgage loans held-for-sale 19,130,001 24,591,553 12,850,339   Loans 4,421,250,676 4,315,561,552 4,144,493,486 Less allowance for loan losses   (66,159,575 )       (66,888,250 )       (67,969,693 ) Loans, net 4,355,091,101 4,248,673,302 4,076,523,793   Premises and equipment, net 71,551,257 72,534,086 72,649,574 Other investments 33,599,454 33,496,695 33,226,195 Accrued interest receivable 16,949,949 15,921,099 15,406,389 Goodwill 243,533,067 243,550,227 243,651,006 Core deposit and other intangible assets 3,129,236 3,365,399 3,840,750 Other real estate owned 12,329,278 12,946,465 15,226,136 Other assets   139,792,704         140,538,915         148,210,975   Total assets $ 5,865,703,491       $ 5,788,791,593       $ 5,563,775,857    

LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits: Noninterest-bearing $ 1,357,934,212 $ 1,324,358,420 $ 1,167,414,487 Interest-bearing 860,781,126 900,576,170 884,294,802 Savings and money market accounts 1,983,237,139 1,950,235,361 1,962,714,398 Time   460,378,271         476,343,393         519,049,037   Total deposits 4,662,330,748 4,651,513,344 4,533,472,724 Securities sold under agreements to repurchase 64,772,511 62,272,670 70,465,326 Federal Home Loan Bank advances 215,523,517 170,556,327 90,637,328 Subordinated debt and other borrowings 96,783,292 97,408,292 98,658,292 Accrued interest payable 622,908 661,273 792,703 Other liabilities   43,736,364         41,997,702         46,041,823   Total liabilities 5,083,769,340 5,024,409,608 4,840,068,196   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; 35,654,541 shares, 35,601,495 shares and 35,221,941 shares issued and outstanding at September 30, 2014, June 30, 2014 and December 31, 2013, respectively

35,654,541 35,601,495 35,221,941 Additional paid-in capital 558,070,636 555,428,349 550,212,135 Retained earnings 185,496,234 170,155,642 142,298,199 Accumulated other comprehensive income (loss), net of taxes   2,712,740         3,196,499         (4,024,614 ) Stockholders’ equity   781,934,151         764,381,985         723,707,661   Total liabilities and stockholders’ equity $ 5,865,703,491       $ 5,788,791,593       $ 5,563,775,857     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 Nine Months Ended September 30, June 30, September 30, September 30,       2014     2014     2013     2014     2013 Interest income: Loans, including fees $ 47,510,761 $ 45,089,706 $ 42,778,193 $ 136,296,125 $ 126,441,555 Securities Taxable 3,469,311 3,628,264 3,538,446 10,817,854 10,860,146 Tax-exempt 1,533,029 1,563,612 1,601,067 4,694,438 4,741,440 Federal funds sold and other   268,455       282,822       259,536         828,335       834,748   Total interest income   52,781,556       50,564,404       48,177,242         152,636,752       142,877,889     Interest expense: Deposits 2,435,426 2,481,762 2,708,376 7,512,428 9,076,757 Securities sold under agreements to repurchase 38,702 31,329 55,601 100,546 204,240 Federal Home Loan Bank advances and other borrowings   770,367       824,912       840,318         2,352,501       2,666,721   Total interest expense   3,244,495       3,338,003       3,604,295         9,965,475       11,947,718   Net interest income 49,537,061 47,226,401 44,572,947 142,671,277 130,930,171 Provision for loan losses   851,194       254,348       684,956         1,593,180       5,631,408   Net interest income after provision for loan losses 48,685,867 46,972,053 43,887,991 141,078,097 125,298,763   Noninterest income: Service charges on deposit accounts 2,912,617 2,965,644 2,797,342 8,669,229 7,818,452 Investment services 2,353,118 2,164,410 1,955,652 6,645,362 5,643,690 Insurance sales commissions 1,037,043 1,144,871 1,021,430 3,566,835 3,522,430 Gains on mortgage loans sold, net 1,352,976 1,668,604 1,326,469 4,256,451 5,130,411 Investment gains (losses) on sales, net 29,221 - (1,441,234 ) 29,221 (1,466,475 ) Trust fees 1,109,278 1,071,848 931,543 3,326,877 2,756,079 Other noninterest income   4,094,200       3,582,067       4,796,079         11,724,284       11,210,770   Total noninterest income   12,888,453       12,597,444       11,387,281         38,218,259       34,615,357     Noninterest expense: Salaries and employee benefits 21,721,663 21,772,469 21,009,680 65,244,092 61,152,789 Equipment and occupancy

6,477,076

5,917,354 5,412,865 18,103,458 15,730,074 Other real estate expense 417,197 226,006 699,211 1,294,355 2,810,779 Marketing and other business development 945,805 1,064,990 720,866 2,919,696 2,498,708 Postage and supplies 569,707 544,194 581,433 1,674,515 1,690,588 Amortization of intangibles 236,163 237,676 246,675 711,514 1,015,848 Other noninterest expense  

3,991,944

     

4,139,239

      4,652,161         11,959,708       11,725,844   Total noninterest expense  

34,359,555

      33,901,928       33,322,891         101,907,338       96,624,630   Income before income taxes

27,214,765

25,667,569 21,952,381 77,389,018 63,289,490 Income tax expense   9,017,943       8,497,589       7,305,431         25,655,089       20,883,883   Net income $

18,196,822

    $ 17,169,980     $ 14,646,950       $ 51,733,929     $ 42,405,607     Per share information: Basic net income per common share $ 0.52     $ 0.49     $ 0.43       $ 1.49     $ 1.24   Diluted net income per common share $ 0.52     $ 0.49     $ 0.42       $ 1.48     $ 1.23     Weighted average shares outstanding: Basic 34,762,206 34,697,888 34,282,899 34,688,064 34,148,562 Diluted 35,155,224 35,081,702 34,606,567 35,069,764 34,415,776   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     (dollars in thousands)     September     June     March     December     September     June       2014     2014     2014     2013     2013     2013   Balance sheet data, at quarter end: Commercial real estate - mortgage loans $ 1,478,869 1,457,335 1,456,172 1,383,435 1,326,838 1,308,873 Consumer real estate - mortgage loans 706,801 698,528 703,592 695,616 687,259 697,490 Construction and land development loans 322,090 292,875 294,055 316,191 319,973 298,509 Commercial and industrial loans 1,724,086 1,697,634 1,568,937 1,605,547 1,513,632 1,504,086 Consumer and other 189,405 169,190 158,931 143,704 121,600 116,407 Total loans 4,421,251 4,315,562 4,181,687 4,144,493 3,969,302 3,925,365 Allowance for loan losses (66,160 ) (66,888 ) (67,524 ) (67,970 ) (67,280 ) (68,695 ) Securities 753,028 782,066 774,134 733,252 743,885 727,889 Total assets 5,865,703 5,788,792 5,600,933 5,563,776 5,391,201 5,373,168 Noninterest-bearing deposits 1,357,934 1,324,358 1,180,202 1,167,414 1,138,421 1,098,887 Total deposits 4,662,331 4,651,513 4,500,577 4,533,473 4,333,543 4,096,578 Securities sold under agreements to repurchase 64,773 62,273 68,093 70,465 84,032 117,346 FHLB advances 215,524 170,556 150,604 90,637 115,671 325,762 Subordinated debt and other borrowings 96,783 97,408 98,033 98,658 99,283 99,908 Total stockholders’ equity 781,934 764,382 742,497 723,708 712,216 696,569   Balance sheet data, quarterly averages: Total loans $ 4,358,473 4,251,900 4,130,289 3,981,214 3,932,218 3,845,476 Securities 767,895 782,436 748,539 731,651 739,625 745,969 Total earning assets 5,264,591 5,187,589 5,023,692 4,903,233 4,825,552 4,710,534 Total assets 5,752,776 5,673,615 5,514,031 5,388,371 5,313,003 5,210,600 Noninterest-bearing deposits 1,317,091 1,202,740 1,128,743 1,179,340 1,100,532 1,012,718 Total deposits 4,655,047 4,518,963 4,509,493 4,407,806 4,198,779 3,963,393 Securities sold under agreements to repurchase 66,429 59,888 62,500 85,096 110,123 129,550 FHLB advances 135,920 224,432 83,787 42,012 181,392 293,581 Subordinated debt and other borrowings 100,404 99,015 98,651 100,030 100,995 102,573 Total stockholders’ equity 774,032 757,089 740,743 722,919 705,275 699,559   Statement of operations data, for the three months ended: Interest income $ 52,782 50,564 49,291 48,405 48,177 47,544 Interest expense   3,245       3,338       3,383       3,436       3,604       3,945   Net interest income 49,537 47,226 45,908 44,969 44,573 43,599 Provision for loan losses   851       254       488       2,225       685       2,774   Net interest income after provision for loan losses 48,686 46,972 45,420 42,744 43,888 40,825 Noninterest income 12,888 12,598 12,732 12,488 11,387 11,326 Noninterest expense   34,360       33,902       33,646       32,637       33,323       30,862   Income before taxes 27,215 25,668 24,506 22,596 21,952 21,289 Income tax expense   9,018       8,498       8,140       7,274       7,305       6,978   Net income $ 18,197       17,170       16,367       15,321       14,647       14,311     Profitability and other ratios:

Return on avg. assets(1)

1.25 % 1.21 % 1.20 % 1.13 % 1.09 % 1.10 %

Return on avg. equity(1)

9.33 % 9.10 % 8.96 % 8.41 % 8.24 % 8.21 %

Return on avg. tangible common equity(1)

13.69 % 13.50 % 13.45 % 12.79 % 12.71 % 12.72 %

Dividend payout ratio(18)

17.58 % 18.29 % 19.16 % 20.38 % - -

Net interest margin(1)(2)

3.79 % 3.71 % 3.76 % 3.70 % 3.72 % 3.77 %

Noninterest income to total revenue(3)

20.65 % 21.06 % 21.72 % 21.73 % 20.35 % 20.62 %

Noninterest income to avg. assets(1)

0.89 % 0.89 % 0.94 % 0.92 % 0.85 % 0.87 %

Noninterest exp. to avg. assets(1)

2.37 % 2.40 % 2.47 % 2.40 % 2.49 % 2.38 %

Noninterest expense (excluding ORE and FHLB restructuring charges) to avg. assets(1)

2.34 % 2.38 % 2.43 % 2.38 % 2.44 % 2.27 %

Efficiency ratio(4)

55.04 % 56.67 % 57.38 % 56.80 % 59.55 % 56.19 % Avg. loans to average deposits 93.63 % 94.09 % 91.59 % 90.32 % 93.65 % 97.02 % Securities to total assets 12.84 % 13.51 % 13.82 % 13.18 % 13.80 % 13.55 %     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)

    September 30, 2014     September 30, 2013

Average

Balances

    Interest    

Rates/

Yields

   

Average

Balances

    Interest    

Rates/

Yields

Interest-earning assets

Loans(1)

$ 4,358,473 $ 47,511 4.34 % $ 3,932,218 $ 42,778 4.33 % Securities Taxable 598,713 3,469 2.30 % 571,985 3,538 2.45 %

Tax-exempt(2)

169,182 1,533 4.80 % 167,640 1,601 5.06 % Federal funds sold and other   138,223       269     0.92 %       153,709       260     0.80 % Total interest-earning assets 5,264,591 $ 52,782     4.03 % 4,825,552 $ 48,177     4.02 % Nonearning assets Intangible assets 246,821 248,095 Other nonearning assets   241,364   239,356 Total assets $ 5,752,776 $ 5,313,003   Interest-bearing liabilities Interest-bearing deposits: Interest checking $ 871,620 $ 366 0.17 % $ 783,623 $ 400 0.20 % Savings and money market 1,997,900 1,427 0.28 % 1,755,037 1,370 0.31 % Time   468,436       643     0.54 %       559,587       938     0.66 % Total interest-bearing deposits 3,337,956 2,436 0.29 % 3,098,247 2,708 0.35 % Securities sold under agreements to repurchase 66,429 39 0.23 % 110,123 56 0.20 % Federal Home Loan Bank advances 135,920 150 0.44 % 181,392 173 0.38 % Subordinated debt and other borrowings   100,404       620     2.45 %       100,995       667     2.62 % Total interest-bearing liabilities 3,640,709 3,245 0.35 % 3,490,757 3,604 0.41 % Noninterest-bearing deposits   1,317,091       -     -         1,100,532       -     -   Total deposits and interest-bearing liabilities 4,957,800 $ 3,245     0.26 % 4,591,289 $ 3,604     0.31 % Other liabilities 20,944 16,439 Stockholders' equity   774,032   705,275 Total liabilities and stockholders' equity $ 5,752,776 $ 5,313,003 Net interest income $ 49,537 $ 44,573

Net interest spread(3)

3.68 % 3.61 %

Net interest margin(4)

3.79 % 3.72 %    

_________________________________(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 September 30, 2014 would have been 3.77% compared to a net interest spread of 3.71% for the quarter ended September 30, 2013.

(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                        

 

Nine Months Ended Nine Months Ended

(dollars in thousands)

    September 30, 2014     September 30, 2013

Average

Balances

    Interest    

Rates/

Yields

   

Average

Balances

    Interest    

Rates/

Yields

Interest-earning assets

Loans(1)

$ 4,247,723 $ 136,296 4.30 % $ 3,820,711 $ 126,442 4.44 % Securities Taxable 594,069 10,818 2.43 % 561,974 10,860 2.58 %

Tax-exempt(2)

172,292 4,694 4.86 % 171,352 4,741 4.94 % Federal funds sold and other   145,422       828     0.90 %       130,226       835     1.01 % Total interest-earning assets 5,159,506 $ 152,636     4.01 % 4,684,263 $ 142,878     4.14 % Nonearning assets Intangible assets 247,086 248,488 Other nonearning assets   241,094   240,305 Total assets $ 5,647,686 $ 5,173,056   Interest-bearing liabilities Interest-bearing deposits: Interest checking $ 901,330 $ 1,186 0.18 % $ 782,965 $ 1,537 0.26 % Savings and money market 1,954,549 4,245 0.29 % 1,656,988 4,381 0.35 % Time   488,941       2,081     0.57 %       575,689       3,159     0.73 % Total interest-bearing deposits 3,344,820 7,512 0.30 % 3,015,642 9,077 0.40 % Securities sold under agreements to repurchase 62,954 101 0.21 % 123,395 204 0.22 % Federal Home Loan Bank advances 148,237 460 0.42 % 191,622 587 0.41 % Subordinated debt and other borrowings   99,363       1,892     2.55 %       103,427       2,080     2.69 % Total interest-bearing liabilities 3,655,374 9,965 0.36 % 3,434,086 11,948 0.46 % Noninterest-bearing deposits   1,216,881       -     -         1,022,576       -     -   Total deposits and interest-bearing liabilities 4,872,255 $ 9,965     0.27 % 4,456,662 $ 11,948     0.36 % Other liabilities 18,018 18,639 Stockholders' equity   757,413   697,755 Total liabilities and stockholders' equity $ 5,647,686 $ 5,173,056 Net interest income $ 142,671 $ 130,930

Net interest spread(3)

3.65 % 3.67 %

Net interest margin(4)

3.75 % 3.80 %    

________________________________(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 nine months ended September 30, 2014 would have been 3.74% compared to a net interest spread of 3.78% for the nine months ended September 30, 2013.

(4) Net interest margin is the result of 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                          

 

September June March December September June

(dollars in thousands)

    2014     2014     2014     2013     2013     2013   Asset quality information and ratios: Nonperforming assets: Nonaccrual loans $ 21,652 15,678 15,606 18,183 19,989 20,561 Other real estate (ORE)   12,329       12,946       15,038       15,226       15,522       15,992   Total nonperforming assets $ 33,981       28,624       30,644       33,409       35,511       36,553  

Past due loans over 90 days and still accruing interest

$ 83 649 7,944 3,057 - 747

Troubled debt restructurings(5)

$ 7,606 7,552 15,108 19,647 19,661 20,427 Net loan charge-offs $ 1,580 890 934 1,535 2,100 3,491 Allowance for loan losses to nonaccrual loans 305.6 % 426.6 % 432.7 % 373.8 % 336.6 % 334.1 % As a percentage of total loans: Past due accruing loans over 30 days 0.32 % 0.45 % 0.43 % 0.39 % 0.33 % 0.39 %

Potential problem loans(6)

1.98 % 1.79 % 2.01 % 1.51 % 1.80 % 2.11 % Allowance for loan losses 1.50 % 1.55 % 1.61 % 1.64 % 1.70 % 1.75 % Nonperforming assets to total loans and ORE 0.77 % 0.66 % 0.73 % 0.80 % 0.89 % 0.93 % Nonperforming assets to total assets 0.58 % 0.49 % 0.55 % 0.60 % 0.66 % 0.68 %

Classified asset ratio (Pinnacle Bank)(8)

20.0 % 18.1 % 21.2 % 18.5 % 20.6 % 23.3 %

Annualized net loan charge-offs year-to-date to avg. loans(7)

0.11 % 0.09 % 0.09 % 0.24 % 0.27 % 0.31 %

Wtd. avg. commercial loan internal risk ratings(6)

4.5 4.5 4.5 4.5 4.5 4.5   Interest rates and yields: Loans 4.34 % 4.27 % 4.30 % 4.28 % 4.33 % 4.41 % Securities 2.85 % 2.93 % 3.17 % 3.16 % 3.04 % 3.03 % Total earning assets 4.03 % 3.97 % 4.04 % 3.98 % 4.02 % 4.10 % Total deposits, including non-interest bearing 0.21 % 0.22 % 0.23 % 0.24 % 0.26 % 0.30 % Securities sold under agreements to repurchase 0.23 % 0.21 % 0.20 % 0.16 % 0.20 % 0.22 % FHLB advances 0.44 % 0.33 % 0.59 % 0.97 % 0.38 % 0.31 % Subordinated debt and other borrowings 2.45 % 2.58 % 2.61 % 2.60 % 2.62 % 2.72 % Total deposits and interest-bearing liabilities 0.26 % 0.27 % 0.29 % 0.29 % 0.31 % 0.35 %  

Pinnacle Financial Partners capital ratios(8):

Stockholders’ equity to total assets 13.3 % 13.2 % 13.3 % 13.0 % 13.2 % 13.0 % Leverage 11.2 % 11.0 % 11.0 % 10.9 % 10.8 % 10.7 % Tier one risk-based 12.2 % 12.1 % 12.2 % 11.8 % 12.0 % 11.7 % Total risk-based 13.4 % 13.4 % 13.5 % 13.0 % 13.2 % 12.9 % Tier one common equity to risk-weighted assets 10.6 % 10.5 % 10.5 % 10.1 % 10.2 % 9.9 % Tangible common equity to tangible assets 9.5 % 9.3 % 9.3 % 9.0 % 9.0 % 8.8 % Pinnacle Bank ratios: Leverage 10.6 % 10.5 % 10.5 % 10.5 % 10.5 % 10.5 % Tier one risk-based 11.5 % 11.5 % 11.7 % 11.3 % 11.6 % 11.5 % Total risk-based 12.8 % 12.8 % 12.9 % 12.6 % 12.9 % 12.7 %   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                          

 

September June March December September June

(dollars in thousands, except per share data)

    2014     2014     2014     2013     2013     2013   Per share data: Earnings – basic $ 0.52 0.49 0.47 0.45 0.43 0.42 Earnings – diluted $ 0.52 0.49 0.47 0.44 0.42 0.42 Common dividends per share $ 0.08 0.08 0.08 0.08 - -

Book value per common share at quarter end(9)

$ 21.93 21.47 20.88 20.55 20.27 19.86 Tangible common equity per common share $ 15.02 14.53 13.93 13.52 13.22 12.78   Weighted avg. common shares – basic 34,762,206 34,697,888 34,602,337 34,355,691 34,282,899 34,172,274 Weighted avg. common shares – diluted 35,155,224 35,081,702 34,966,600 34,765,424 34,606,567 34,431,054 Common shares outstanding 35,654,541 35,601,495 35,567,268 35,221,941 35,133,733 35,073,763   Investor information: Closing sales price $ 36.10 39.48 37.49 32.53 29.81 25.71 High closing sales price during quarter $ 39.75 39.48 38.64 33.25 29.99 26.17 Low closing sales price during quarter $ 35.21 33.46 31.02 29.67 26.56 21.68   Other information: Gains on mortgage loans sold: Mortgage loan sales: Gross loans sold $ 96,050 83,421 61,290 70,194 105,817 123,181 Gross fees (10) $ 2,256 2,461 1,780 1,729 2,294 3,146 Gross fees as a percentage of loans originated 2.35 % 2.95 % 2.90 % 2.46 % 2.17 % 2.55 % Net gain on mortgage loans sold $ 1,353 1,669 1,235 1,113 1,326 1,949

Investment gains (losses) on sales, net(17)

$ 29 - - - (1,441 ) (25 )

Brokerage account assets, at quarter-end(11)

$ 1,658,237 1,680,619 1,611,232 1,560,349 1,445,461 1,387,172 Trust account managed assets, at quarter-end $ 720,071 687,772 613,440 605,324 576,190 630,322

Core deposits(12)

$ 4,260,627 4,245,745 4,087,477 4,100,037 3,903,000 3,771,424

Core deposits to total funding(12)

84.6 % 85.2 % 84.8 % 85.5 % 84.3 % 81.3 % Risk-weighted assets $ 5,049,592 4,924,884 4,730,907 4,803,942 4,557,124 4,532,735 Total assets per full-time equivalent employee $ 7,744 7,734 7,528 7,408 7,305 7,335 Annualized revenues per full-time equivalent employee $ 327.0 320.6 319.7 303.5 300.8 300.8 Annualized expenses per full-time equivalent employee $ 180.0 181.7 183.4 172.4 179.1 169.0 Number of employees (full-time equivalent) 757.5 748.5 744.0 751.0 738.0 732.5

Associate retention rate(13)

93.5 % 93.8 % 95.6 % 94.4 % 93.9 % 93.0 %  

Selected economic information (in thousands)(14):

Nashville MSA nonfarm employment - August 2014 838.0 829.8 827.1 817.3 815.1 817.1 Knoxville MSA nonfarm employment - August 2014 342.4 342.2 338.0 334.2 335.6 337.9 Nashville MSA unemployment - August 2014 5.8 % 5.6 % 5.4 % 5.9 % 6.5 % 6.6 % Knoxville MSA unemployment - August 2014 6.1 % 5.9 % 5.8 % 6.3 % 7.0 % 6.9 % Nashville residential median home price - September 2014 $ 211.4 222.0 195.0 198.8 197.9 205.9

Nashville inventory of residential homes for sale - September 2014(16)

9.9 10.6 9.4 8.2 10.2 10.6   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                         September June March December September June (dollars in thousands, except per share data)     2014     2014     2014     2013     2013     2013   Tangible assets: Total assets $ 5,865,703 5,788,792 5,600,933 5,563,776 5,391,201 5,373,168 Less: Goodwill (243,533 ) (243,550 ) (243,568 ) (243,651 ) (243,808 ) (243,900 ) Core deposit and other intangible assets   (3,129 )     (3,365 )     (3,603 )     (3,841 )     (4,087 )     (4,334 ) Net tangible assets $ 5,619,041       5,541,877       5,353,762       5,316,284       5,143,306       5,124,934     Tangible equity: Total stockholders' equity $ 781,934 764,382 742,497 723,708 712,216 696,569 Less: Goodwill (243,533 ) (243,550 ) (243,568 ) (243,651 ) (243,808 ) (243,900 ) Core deposit and other intangible assets   (3,129 )     (3,365 )     (3,603 )     (3,841 )     (4,087 )     (4,334 ) Net tangible common equity $ 535,272       517,467       495,326       476,216       464,321       448,335     Ratio of tangible common equity to tangible assets   9.53 %     9.34 %     9.25 %     8.96 %     9.03 %     8.75 %     Average tangible equity: Average stockholders' equity $ 774,032 757,089 740,743 722,919 705,275 699,559 Less: Average goodwill (243,544 ) (243,559 ) (243,610 ) (243,729 ) (243,854 ) (243,956 ) Core deposit and other intangible assets   (3,278 )     (3,484 )     (3,722 )     (3,964 )     (4,211 )     (4,458 ) Net average tangible common equity $ 527,210       510,046       493,411       475,226       457,210       451,145    

Return on average tangible common equity(1)

  13.69 %     13.50 %     13.45 %     12.79 %     12.71 %     12.72 %       For the three months ended September June March December September June 2014     2014     2014     2013     2013     2013   Net interest income $ 49,537 47,226 45,908 44,969 44,573 43,599   Noninterest income 12,888 12,598 12,732 12,488 11,387 11,326 Less: Investment (gains) losses on sales, net   (29 )     -       -       -       1,441       25  

Noninterest income excluding investment (gains) losses on sales, net

  12,859       12,598       12,732       12,488       12,828       12,122  

Total revenues excluding the impact of investment (gains) losses on sales, net

  62,396       59,824       58,644       57,457       57,401       55,721     Noninterest expense 34,360 33,902 33,646 32,637 33,323 30,862 Less: Other real estate expense   417       226       651       302       699       1,391  

Noninterest expense excluding the impact of other real estate expense

  33,943       33,676       32,995       32,335       32,624       29,471    

Adjusted pre-tax pre-provision income(15)

$ 28,453       26,148       25,645       25,122       24,777       26,250      

Efficiency Ratio(4)

55.0 % 56.7 % 57.4 % 56.8 % 59.5 % 56.2 %     Total average assets $ 5,752,776       5,673,615       5,514,031       5,388,371       5,313,003       5,210,600    

Noninterest expense (excluding ORE expense) to avg. assets(1)

2.34 % 2.38 % 2.43 % 2.38 % 2.44 % 2.27 %     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. Troubled debt restructurings 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 significant period of time, extending the maturity of the loan, etc.). All of these loans continue to accrue interest at the contractual rate.

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 defined as follows:

Equity to total assets – End of period total stockholders’ equity as a percentage of end of period assets.

Tangible common equity to total assets – End of period total stockholders' equity less end of period goodwill, core deposit and other intangibles 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.

Classified asset – Classified assets as a percentage of Tier 1 capital plus allowance for loan losses.

Tier one common equity to risk weighted assets – Tier 1 capital (pursuant to risk-based capital guidelines) less the amount of any preferred stock or subordinated indebtedness that is considered as a component of tier 1 capital 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 mortgage loans sold, net”, 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. Core deposits include all transaction deposit accounts, money market and savings accounts and all certificates of deposit issued in a denomination of less than $250,000. 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. 13. 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. 14. Employment and unemployment data is from BERC- MTSU & Bureau of Labor Statistics. Labor force data is seasonally adjusted. The most recent quarter data presented is as of the most recent month that data is available as of the release date. Historical data is subject to update by the BERC- MTSU & Bureau of Labor Statistics. Historical data is presented based on the most recently reported data available by the BERC- MTSU & Bureau of Labor Statistics. The Nashville home data is from the Greater Nashville Association of Realtors. 15. Adjusted pre-tax, pre-provision income excludes the impact of investment gains and losses on sales and impairments, net and non-credit related loan losses as well as other real estate owned expenses and FHLB restructuring charges. 16. Represents month's supply of homes currently listed with MLS based on current sales activity in the Nashville MSA. 17. Represents investment gains (losses) on sales and impairments, net occurring as a result of both credit losses and losses incurred as the result of a change in management's intention to sell a bond prior to the recovery of its amortized cost basis.

18. The dividend payout ratio is calculated as the sum of the annualized dividend rate divided by the trailing 12-months diluted earnings per share as of the dividend declaration date.

       

Pinnacle Financial Partners, Inc.Media Contact:Nikki Klemmer, 615-743-6132orFinancial Contact:Harold Carpenter, 615-744-3742www.pnfp.com