Press Release

PNFP Reports Diluted EPS of $1.12, ROAA of 1.50 Percent and ROTCE of 18.01 Percent for 2Q 2018

Company Release - 7/17/2018 6:00 PM ET

Excl. merger-related charges, diluted EPS was $1.15, ROAA was 1.54 percent and ROTCE was 18.45 percent for 2Q 2018

NASHVILLE, Tenn. NASHVILLE, Tenn.--(BUSINESS WIRE)-- Pinnacle Financial Partners, Inc. (Nasdaq/NGS: PNFP) reported net income per diluted common share of $1.12 for the quarter ended June 30, 2018, compared to net income per diluted common share of $0.80 for the quarter ended June 30, 2017, an increase of 40.0 percent. Net income per diluted common share was $2.20 for the six months ended June 30, 2018, compared to net income per diluted common share of $1.62 for the six months ended June 30, 2017, an increase of 35.8 percent.

Excluding pre-tax merger-related charges of $2.9 million, net income per diluted common share was $1.15 for the three months ended June 30, 2018, compared to net income per diluted common share of $0.84 for the three months ended June 30, 2017, excluding pre-tax merger-related charges of $3.2 million, an increase of 36.9 percent. Net income per diluted common share was $2.28 for the six months ended June 30, 2018, excluding pre-tax merger-related charges of $8.3 million, compared to net income per diluted common share of $1.67 for the six months ended June 30, 2017, excluding pre-tax merger-related charges of $3.9 million, an increase of 36.5 percent.

"We are experiencing phenomenal growth in 2018," said M. Terry Turner, Pinnacle's president and chief executive officer. "As we considered our merger with Bank of North Carolina last year, we were confident that we could meaningfully increase the core earnings capacity of our firm even prior to considering tax reform. Nearly 35 percent earnings growth after merger-related charges in the second quarter of this year versus the same quarter last year provides compelling evidence of our associates' ability to integrate a sizable merger in a short period of time while continuing to rapidly expand the legacy Tennessee franchise.

"Furthermore, we continue to attract successful, experienced bankers to our ranks. We recruited a total of 39 revenue producers across all markets in the second quarter, a strong predictor of our continued future growth. Our significant investment in promoting our distinctive culture across the entire franchise is reaping great rewards, as 16 of these revenue producers were hired in the Carolinas and Virginia, six of whom are in the C&I segment."

GROWING THE CORE EARNINGS CAPACITY OF THE FIRM:

  • Loans at June 30, 2018 were a record $17.04 billion, an increase of $716.8 million from March 31, 2018 and $2.28 billion from June 30, 2017, reflecting year-over-year growth of 15.5 percent. Annualized organic loan growth during the second quarter of 2018 was 17.6 percent.
    • Average loans were $16.73 billion for the three months ended June 30, 2018, up $772.3 million from the $15.96 billion for the three months ended March 31, 2018, an annualized growth rate of 19.4 percent.
    • At June 30, 2018, the remaining discount associated with fair value accounting adjustments on acquired loans was $132.1 million, compared to $148.9 million at March 31, 2018.
  • Deposits at June 30, 2018 were a record $17.86 billion, an increase of $1.35 billion from March 31, 2018 and $2.10 billion from June 30, 2017, reflecting year-over-year growth of 13.3 percent.
    • Average deposits were $16.95 billion for the three months ended June 30, 2018, up $668.8 million from the $16.28 billion for the three months ended March 31, 2018.
    • Core deposits were $15.40 billion at June 30, 2018, compared to $14.75 billion at March 31, 2018 and $14.46 billion at June 30, 2017. The annualized growth rate of core deposits in the second quarter of 2018 was 17.7 percent, which effectively matched the annualized growth rate of loans in the second quarter. Core deposit amounts have been restated in both the current and previous quarters for the recent regulatory changes for treatment of reciprocal deposits.
  • Revenues for the quarter ended June 30, 2018 were $230.2 million, an increase of $11.5 million from the $218.7 million recognized in the first quarter of 2018 and $88.5 million from the quarter ended June 30, 2017. That is a year-over-year growth rate of 62.5 percent and an annualized rate of growth of 21.1 percent in the second quarter of this year.
    • Revenue per fully diluted share was $2.97 for the three months ended June 30, 2018, compared to $2.83 for the first quarter of 2018 and $2.64 for the second quarter of 2017.

"Our model of hiring experienced bankers to produce outsized loan and deposit growth continues to work extremely well," Turner said. "Loan growth continues to be exceptional for our firm, up nearly 18 percent on an annualized basis in the second quarter. Importantly, we are also pleased that approximately 57 percent of our loan growth was in our primary loan growth segments, C&I and owner-occupied commercial real estate. I am also pleased to report that core deposits also showed strong growth during the second quarter, also up nearly 18 percent on an annualized basis."

FOCUSING ON PROFITABILITY:

  • Return on average assets was 1.50 percent for the second quarter of 2018, compared to 1.53 percent for the first quarter of 2018 and 1.30 percent for the second quarter last year. Second quarter 2018 return on average tangible assets amounted to 1.63 percent, compared to 1.67 percent for the first quarter of 2018 and 1.38 percent for the second quarter last year.
    • Excluding the aforementioned merger-related charges, return on average assets was 1.54 percent for the second quarter of 2018, compared to 1.60 percent for the first quarter of 2018 and 1.35 percent for the second quarter of 2017. Likewise, excluding these merger-related charges, the firm’s return on average tangible assets was 1.67 percent for the second quarter of 2018, compared to 1.74 percent for first quarter of 2018 and 1.44 for the second quarter of 2017.
  • Return on average common equity for the second quarter of 2018 amounted to 9.18 percent, compared to 9.07 percent for the first quarter of 2018 and 8.40 percent for the second quarter last year. Second quarter 2018 return on average tangible common equity amounted to 18.01 percent, compared to 18.12 percent for the first quarter of 2018 and 13.58 percent for the second quarter last year.
    • Excluding the aforementioned merger-related charges, return on average tangible common equity amounted to 18.45 percent for the second quarter of 2018, compared to 18.98 percent for the first quarter of 2018 and 14.19 percent for the second quarter of 2017.

"Our profitability metrics were strong again in the second quarter," said Harold R. Carpenter, Pinnacle's chief financial officer. "We have long targeted top-quartile results, which we believe will lead to top-quartile share price performance. We believe our firm has enjoyed a reputation as a high-performing, high-growth firm for many years. Excluding merger-related charges, these strong profitability metrics, such as a return on average assets of 1.54 percent and a return on average tangible common equity of 18.45 percent for the second quarter of 2018, confirm the original deal rationale and demonstrate our ability to profitably integrate a large bank. That said, we believe we continue to have runway to grow our franchise rapidly in our existing markets without the need for acquisitions to facilitate growth."

OTHER HIGHLIGHTS:

  • Revenues
    • Net interest income for the quarter ended June 30, 2018 was $182.2 million, compared to $174.5 million for the first quarter of 2018 and $106.6 million for the second quarter of 2017. That represents an annualized organic growth rate of 17.9 percent between the first and second quarter of 2018.
      • Net interest margin was 3.69 percent for the second quarter of 2018, compared to 3.77 percent for the first quarter of 2018 and 3.68 for the second quarter of 2017.
      • Included in net interest income for the second quarter of 2018 was $16.1 million of discount accretion associated with fair value adjustments, compared to $15.4 million of discount accretion recognized in the first quarter of 2018.
    • Noninterest income for the quarter ended June 30, 2018 was $47.9 million, compared to $44.2 million for the first quarter of 2018 and $35.1 million for the second quarter of 2017, up 34.1 percent on an annualized basis.
      • Wealth management revenues, which include investment, trust and insurance services, were $10.5 million for the quarter ended June 30, 2018, compared to $11.3 million for the first quarter of 2018 and $6.2 million for the second quarter of 2017. The quarter-over-quarter decrease was primarily attributable to $1.0 million of nonrecurring insurance revenues for favorable claims experience that were received in the first quarter of 2018.
      • Income from the firm's investment in Bankers Healthcare Group, Inc. (BHG) was $9.7 million for the quarter ended June 30, 2018, compared to $9.4 million for the quarter ended March 31, 2018 and $8.8 million for the quarter ended June 30, 2017. Income from the firm's investment in BHG grew 10.7 percent for the quarter ended June 30, 2018, compared to the quarter ended June 30, 2017.

"We are reporting an annualized growth rate in net interest income of almost 18 percent and an annualized growth rate of 29 percent in fees for the second quarter of 2018," Carpenter said. "Loan yields improved this quarter by approximately 13 basis points, comparing the second quarter to the first quarter. Deposit rates increased by 18 basis points over that same period, which contributed to the decrease in the net interest margin this quarter. Though our margins narrowed in the quarter, we continue to work to maintain our margins and will also remain focused on attracting revenue producers and their clients at a remarkable pace. Since June 30, 2017, which was shortly following the closing of the BNC merger, our loans have increased organically $2.3 billion, and our deposits have increased $2.1 billion. We are on a pace to exceed those numbers for the year ending Dec. 31, 2018.

"Given our high level of profitability and the opportunity we have for organic growth in all our markets, we will be focused primarily on growing revenue and earnings. Accordingly, we are willing to accept volatility in certain financial metrics, such as increased funding costs, at a time when our efficiency ratio or other metrics are improving. We intend to continue adding revenue producers, pricing competitively, growing earning assets and producing outsized earnings growth. As the industry may be heading into a period of low single-digit loan and deposit growth, we believe our proven ability to take market share from vulnerable competitors is distinctive and makes us less dependent upon market conditions to grow our balance sheet and net interest income. In summary, our focus is on gathering more clients in order to grow the core earnings capacity of this firm reliably over the long-haul."

  • Noninterest expense and taxes
    • Noninterest expense for the quarter ended June 30, 2018 was $110.9 million, compared to $108.6 million in the first quarter of 2018 and $71.8 million in the second quarter of 2017, reflecting a year-over-year increase of 54.5 percent.
      • Salaries and employee benefits were $64.1 million in the second quarter of 2018, compared to $63.7 million in the first quarter of 2018 and $43.7 million in the second quarter of last year, reflecting a year-over-year increase of 46.8 percent.
        • Included in salaries and employee benefits are costs related to the firm’s annual cash incentive plan. Incentive costs for this plan amounted to $6.9 million in the second quarter of 2018, compared to $5.7 million in the first quarter of 2018 and $5.4 million in the second quarter of last year.
      • The efficiency ratio for the second quarter of 2018 decreased to 48.2 percent, compared to 49.7 percent for the first quarter of 2018. The ratio of noninterest expenses to average assets decreased to 1.91 percent for the second quarter of 2018 from 1.98 percent in the first quarter of 2018.
        • Excluding merger-related charges and other real estate owned (ORE) expense, the efficiency ratio was 46.6 percent for the second quarter of 2018, compared to 47.6 percent for the first quarter of 2018, and the ratio of noninterest expense to average assets was 1.85 percent for the second quarter of 2018, compared to 1.90 percent for the first quarter of 2018.
      • The effective tax rate for the second quarter of 2018 was 20.9 percent, compared to 19.0 percent for the first quarter of 2018 and 31.7 percent for the second quarter of 2017. The Tax Cuts and Jobs Act reduced the aggregate blended federal and state statutory income tax rate for Pinnacle from 39.23 percent to 26.14 percent.
        • Included in income tax expense for the three months ended June 30, 2018 was a discrete item in the amount of $72,000 related to the application of FASB Accounting Standards Update (ASU) 2016-09, Stock Compensation Improvements to Employee Share-Based Payment Activity compared to $2.7 million for the three months ended March 31, 2018 and $789,000 for the three months ended June 30, 2017.
        • Inclusive of all of these matters, the firm anticipates an effective tax rate of between 21.0 and 22.0 percent for calendar year 2018.

"We continue to be pleased with expense management across our franchise," Carpenter said. "Both the efficiency ratio and the expense to asset ratio continued to improve even while hiring a relatively larger number of great bankers. One of the variables that increases the volatility of our expense base is the impact of our corporate-wide incentive programs. At the end of the first quarter of 2018, we were accruing annual cash incentives at approximately 75 percent of our target award value. We have increased that percentage to approximately 80 percent of our target award as of June 30, 2018. Our ability to maintain our incentive accrual at 80 percent or increase it will depend on our ability to generate the revenue and EPS necessary to fund such awards."

  • Asset quality
    • Nonperforming assets decreased to 0.53 percent of total loans and ORE at June 30, 2018, compared to 0.58 percent at March 31, 2018 and 0.44 percent at June 30, 2017. Nonperforming assets were $91.1 million at June 30, 2018, compared to $94.7 million at March 31, 2018 and $65.4 million at June 30, 2017.
    • The allowance for loan losses represented 0.44 percent of total loans at June 30, 2018 compared to 0.43 percent March 31, 2018 and 0.42 percent at June 30, 2017.
      • The ratio of the allowance for loan losses to nonperforming loans was 106.7 percent at June 30, 2018, compared to 100.0 percent at March 31, 2018 and 154.0 percent at June 30, 2017. At June 30, 2018, purchase credit impaired loans of $12.7 million, which were recorded at fair value upon acquisition, represented 17.9 percent of our nonperforming loans.
      • Net charge-offs were $3.9 million for the quarter ended June 30, 2018, compared to $4.0 million for the quarter ended March 31, 2018 and $3.2 million for the quarter ended June 30, 2017. Annualized net charge-offs as a percentage of average loans for both the quarters ended June 30, 2018 and March 31, 2018 were 0.10 percent, compared to 0.17 percent for the second quarter of 2017.
      • Provision for loan losses was $9.4 million in the second quarter of 2018, compared to $6.9 million in the first quarter of 2018 and $6.8 million in the second quarter of 2017.

"Overall, asset quality for our firm remains exceptional," Carpenter said. "As we had projected last quarter, our commercial real estate to total risk-based capital ratio decreased during the second quarter of 2018 and was 304.3 percent at June 30, 2018. We continue to believe this ratio will fall back within our long-term operating range of less than 300 percent of total risk-based capital during the last half of 2018. Additionally, the ratio of construction loans to total risk-based capital also decreased to 94.6 percent at June 30, 2018. Our position on these two ratios remains consistent. Should the commercial real estate to total risk-based capital ratio exceed 300 percent or the construction loans to total risk-based capital ratio exceed 100 percent, we intend to work those ratios to below the 100/300 thresholds over an appropriate time period. We do not intend to allow those ratios to remain permanently in excess of those thresholds."

BOARD OF DIRECTORS DECLARES DIVIDEND

On July 17, 2018, Pinnacle’s Board of Directors approved a quarterly cash dividend of $0.14 per common share to be paid on Aug. 31, 2018 to common shareholders of record as of the close of business on Aug. 3, 2018. 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 July 18, 2018 to discuss second quarter 2018 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 earned a place on FORTUNE’s 2017 and 2018 lists of the 100 Best Companies to Work For in the U.S., and American Banker recognized Pinnacle as the sixth-best bank to work for in 2017.

The firm began operations in a single location in downtown Nashville, TN in October 2000 and has since grown to approximately $24.0 billion in assets as of June 30, 2018. As the second-largest bank holding company headquartered in Tennessee, Pinnacle operates in 11 primarily urban markets in Tennessee, the Carolinas and Virginia.

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

Forward-Looking Statements

All statements, other than statements of historical fact, included in this press release, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words "expect," "anticipate," "intend," "should," "plan," "believe," "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 statements. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause the actual results to differ materially from the statements, including, but not limited to: (i) deterioration in the financial condition of borrowers resulting in significant increases in loan losses and provisions for those losses; (ii) the ability to grow and retain low-cost core deposits and retain large, uninsured deposits; (iii) the inability of Pinnacle Financial, or entities in which it has significant investments, like BHG, to maintain the historical growth rate of its, or such entities', 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) the impact of competition with other financial institutions, including pricing pressures (including those resulting from the Tax Cuts and Jobs Act) and the resulting impact on Pinnacle Financial’s results, including as a result of compression to net interest margin; (vii) greater than anticipated adverse conditions in the national or local economies including in Pinnacle Financial's markets throughout Tennessee, North Carolina, South Carolina and Virginia, particularly in commercial and residential real estate markets; (viii) fluctuations or unanticipated changes in interest rates on loans or deposits or that affect the yield curve; (ix) the results of regulatory examinations; (x) a merger or acquisition; (xi) risks of expansion into new geographic or product markets; (xii) any matter that would cause Pinnacle Financial to conclude that there was impairment of any asset, including intangible assets; (xiii) reduced ability to attract additional financial advisors (or failure of such advisors to cause their clients to switch to Pinnacle Bank), to retain financial advisors (including as a result of the competitive environment resulting from the Tax Cuts and Jobs Act) or otherwise to attract customers from other financial institutions; (xiv) further deterioration in the valuation of other real estate owned and increased expenses associated therewith; (xv) inability to comply with regulatory capital requirements, including those resulting from changes to capital calculation methodologies, required capital maintenance levels or regulatory requests or directives, particularly if Pinnacle Financial's level of applicable commercial real estate loans continues to exceed percentage levels of total capital in guidelines recommended by its regulators; (xvi) risks associated with litigation, including the applicability of insurance coverage; (xvii) the risk of successful integration of the businesses Pinnacle Financial has recently acquired with its business; (xviii) approval of the declaration of any dividend by Pinnacle Financial's board of directors; (xix) the vulnerability of Pinnacle Bank's network and online banking portals, and the systems of parties with whom Pinnacle Financial contracts, 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, including oversight of companies in which Pinnacle Financial or Pinnacle Bank have significant investments, like BHG, and the development of additional banking products for Pinnacle Bank's corporate and consumer clients; (xxi) the risks associated with Pinnacle Financial and Pinnacle Bank being a minority investor in BHG, including the risk that the owners of a majority of the equity interests in BHG decide to sell the company if not prohibited from doing so by Pinnacle Financial or Pinnacle Bank; (xxii) changes in state and federal legislation, regulations or policies applicable to banks and other financial service providers, like BHG, including regulatory or legislative developments; (xxiii) disruption from Pinnacle Financial's merger with BNC with customers, suppliers, employee or other business partners relationships; (xxiv) the risk of successful integration of Pinnacle Financial's and BNC's businesses; (xxv) the risk that the integration of Pinnacle Financial's and BNC's operations will be more costly or difficult than expected; (xxvi) the availability and access to capital; (xxvii) adverse results (including costs, fines, reputational harm, inability to obtain necessary approvals and/or other negative effects) from current or future litigation, regulatory examinations or other legal and/or regulatory actions; and (xxviii) general competitive, economic, political and market conditions. Additional factors which could affect the forward looking statements can be found in Pinnacle Financial's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K filed with the SEC and available on the SEC's website at http://www.sec.gov. Pinnacle Financial disclaims any obligation to update or revise any forward-looking statements contained in this press release, which speak only as of the date hereof, whether as a result of new information, future events or otherwise.

Non-GAAP Financial Matters

This release contains certain non-GAAP financial measures, including, without limitation, revenues per diluted share, earnings per diluted share, efficiency ratio, noninterest expense and the ratio of noninterest expense to average assets and noninterest expense to the sum of net interest income and noninterest income, in each case excluding the impact of expenses related to other real estate owned, gains or losses on sale of investments, the revaluation of Pinnacle Financial’s deferred tax assets and other matters for the accounting periods presented. This release also includes non-GAAP financial measures which exclude expenses associated with Pinnacle Bank's mergers with CapitalMark Bank & Trust, Magna Bank, Avenue Financial Holdings, Inc. and BNC, as well as Pinnacle Financial's and its bank subsidiary's investments in BHG. This release may also contain certain other non-GAAP capital ratios and performance measures. These non-GAAP financial measures exclude the impact of goodwill and core deposit intangibles associated with Pinnacle Financial's acquisitions of BNC, Avenue, Magna Bank, CapitalMark Bank & Trust, Mid-America Bancshares, Inc., Cavalry Bancorp, Inc. and other acquisitions which collectively are less material to the non-GAAP measure. The presentation of the non-GAAP financial information is not intended to be considered in isolation or as a substitute for any measure prepared in accordance with GAAP. Because non-GAAP financial measures presented in this release are not measurements determined in accordance with GAAP and are susceptible to varying calculations, these non-GAAP financial measures, as presented, may not be comparable to other similarly titled measures presented by other companies.

Pinnacle Financial believes that these non-GAAP financial measures facilitate making period-to-period comparisons and are meaningful indications of its operating performance. In addition, because intangible assets such as goodwill and the core deposit intangible, and the other items excluded each vary extensively from company to company, Pinnacle Financial believes that the presentation of this information allows investors to more easily compare Pinnacle Financial's results to the results of other companies. Pinnacle Financial's management utilizes this non-GAAP financial information to compare Pinnacle Financial's operating performance for 2018 versus certain periods in 2017 and to internally prepared projections.

 
 
 
 
 
PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS – UNAUDITED
(dollars in thousands)              
June 30, 2018     December 31, 2017     June 30, 2017
ASSETS
Cash and noninterest-bearing due from banks $ 193,962 $ 176,553 $ 121,804
Interest-bearing due from banks 423,498 496,911 416,981
Federal funds sold and other 29,463       106,132        
Cash and cash equivalents 646,923 779,596 538,785
 
Securities available-for-sale, at fair value 2,960,128 2,515,283 2,427,034
Securities held-to-maturity (fair value of $15.3 million, $20.8 million, and $21.3 million at June 30, 2018, Dec. 31, 2017, and June 30, 2017, respectively) 15,341 20,762 21,163
Consumer loans held-for-sale 108,592 103,729 90,275
Commercial loans held-for-sale 21,277 25,456 11,368
 
Loans 17,042,853 15,633,116 14,758,765
Less allowance for loan losses (75,670 )     (67,240 )     (61,945 )
Loans, net 16,967,183 15,565,876 14,696,820
 
Premises and equipment, net 269,876 266,014 258,037
Equity method investment 217,283 221,667 207,021
Accrued interest receivable 65,175 57,440 48,418
Goodwill 1,807,121 1,808,002 1,800,742
Core deposits and other intangible assets 51,353 56,710 60,964
Other real estate owned 19,785 27,831 24,806
Other assets 838,333       757,334       700,721  
Total assets $ 23,988,370       $ 22,205,700       $ 20,886,154  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 4,361,414 $ 4,381,386 $ 3,893,603
Interest-bearing 2,939,833 2,987,291 2,602,527
Savings and money market accounts 7,129,335 6,548,964 6,820,024
Time 3,426,836       2,534,061       2,441,320  
Total deposits 17,857,418 16,451,702 15,757,474
Securities sold under agreements to repurchase 128,739 135,262 205,008
Federal Home Loan Bank advances 1,581,867 1,319,909 725,231
Subordinated debt and other borrowings 465,433 465,505 465,419
Accrued interest payable 15,604 10,480 7,631
Other liabilities 112,632       114,890       110,064  
Total liabilities 20,161,693 18,497,748 17,270,827
 
Preferred stock, no par value; 10.0 million shares authorized; no shares issued and outstanding
Common stock, par value $1.00; 180.0 million shares and 90.0 million shares authorized; 77.9 million, 77.7 million shares and 77.6 million shares issued and outstanding at June 30, 2018, Dec. 31, 2017 and June 30, 2017, respectively 77,855 77,740 77,646
Additional paid-in capital 3,119,461 3,115,304 3,100,155
Retained earnings 667,594 519,144 449,762
Accumulated other comprehensive loss, net of taxes (38,233 )     (4,236 )     (12,236 )
Total stockholders' equity 3,826,677       3,707,952       3,615,327  
Total liabilities and stockholders' equity $ 23,988,370       $ 22,205,700       $ 20,886,154  
 
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
(dollars in thousands, except for per share data)       Three Months Ended     Six Months Ended

June 30,

2018

   

March 31,

2018

   

June 30,

2017

   

June 30,

2018

   

June 30,

2017

Interest income:            
Loans, including fees $ 208,758 $ 191,214 $ 112,320 $ 399,972 $ 205,538
Securities
Taxable 11,748 11,222 8,265 22,970 14,698
Tax-exempt 8,350 7,285 2,235 15,635 3,913
Federal funds sold and other 2,128       1,807       923       3,935       1,737  
Total interest income 230,984       211,528       123,743       442,512       225,886  
 
Interest expense:
Deposits 32,767 23,981 10,994 56,748 19,113
Securities sold under agreements to repurchase 143 130 79 273 128
Federal Home Loan Bank advances and other borrowings 15,838       12,946       6,043       28,784       11,251  
Total interest expense 48,748       37,057       17,116       85,805       30,492  
Net interest income 182,236 174,471 106,627 356,707 195,394
Provision for loan losses 9,402       6,931       6,812       16,333       10,463  
Net interest income after provision for loan losses 172,834 167,540 99,815 340,374 184,931
 
Noninterest income:
Service charges on deposit accounts 6,065 5,820 4,179 11,885 8,034
Investment services 4,906 5,107 3,110 10,013 5,932
Insurance sales commissions 2,048 3,119 1,461 5,167 3,320
Gains on mortgage loans sold, net 3,777 3,744 4,668 7,521 8,822
Investment gains on sales, net 30 30
Trust fees 3,564 3,117 1,677 6,681 3,382
Income from equity method investment 9,690 9,360 8,755 19,050 16,578
Other noninterest income 17,889       13,886       11,207       31,775       19,370  
Total noninterest income 47,939       44,183       35,057       92,122       65,438  
 
Noninterest expense:
Salaries and employee benefits 64,112 63,719 43,674 127,831 82,028
Equipment and occupancy 18,208 17,743 10,713 35,951 20,387
Other real estate, net 819 (794 ) 63 25 315
Marketing and other business development 2,544 2,247 2,127 4,791 4,006
Postage and supplies 2,291 2,039 1,122 4,330 2,319
Amortization of intangibles 2,659 2,698 1,472 5,357 2,668
Merger-related expenses 2,906 5,353 3,221 8,259 3,893
Other noninterest expense 17,369       15,575       9,406       32,944       18,235  
Total noninterest expense 110,908       108,580       71,798       219,488       133,851  
Income before income taxes 109,865 103,143 63,074 213,008 116,518
Income tax expense 23,000       19,633       19,988       42,633       33,779  
Net income $ 86,865       $ 83,510       $ 43,086       $ 170,375       $ 82,739  
 
Per share information:
Basic net income per common share $ 1.13       $ 1.08       $ 0.81       $ 2.21       $ 1.64  
Diluted net income per common share $ 1.12       $ 1.08       $ 0.80       $ 2.20       $ 1.62  
 
Weighted average shares outstanding:
Basic 77,123,854 77,077,957 53,097,776 77,101,816 50,574,079
Diluted 77,468,082 77,365,664 53,665,925 77,417,930 51,105,996
 
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) June March December September June March
2018     2018     2017     2017     2017     2017
Balance sheet data, at quarter end:
Commercial and industrial loans $ 4,821,299 4,490,886 4,141,341 3,971,227 3,688,357 2,980,840
Commercial real estate - owner occupied 2,504,891 2,427,946 2,460,015 2,433,762 2,368,641 1,399,512
Commercial real estate - investment 3,822,182 3,714,854 3,564,048 3,398,381 3,357,120 1,386,398
Commercial real estate - multifamily and other 697,566 651,488 645,547 617,899 661,611 395,674
Consumer real estate - mortgage loans 2,699,399 2,580,766 2,561,214 2,541,180 2,552,927 1,196,375
Construction and land development loans 2,133,646 2,095,875 1,908,288 1,939,809 1,772,799 1,015,127
Consumer and other 363,870 364,202 352,663 357,528 357,310 268,106
Total loans 17,042,853 16,326,017 15,633,116 15,259,786 14,758,765 8,642,032
Allowance for loan losses (75,670 ) (70,204 ) (67,240 ) (65,159 ) (61,944 ) (58,350 )
Securities 2,975,469 2,981,301 2,536,046 2,901,029 2,448,198 1,604,774
Total assets 23,988,370 22,935,174 22,205,700 21,790,371 20,886,154 11,724,601
Noninterest-bearing deposits 4,361,414 4,274,213 4,381,386 4,099,086 3,893,603 2,508,680
Total deposits 17,857,418 16,502,909 16,451,702 15,789,585 15,757,475 9,280,597
Securities sold under agreements to repurchase 128,739 131,863 135,262 129,557 205,008 71,157
FHLB advances 1,581,867 1,976,881 1,319,909 1,623,947 725,230 181,264
Subordinated debt and other borrowings 465,433 465,550 465,505 465,461 465,419 350,849
Total stockholders' equity 3,826,677 3,749,303 3,707,952 3,673,349 3,615,327 1,723,075
 
Balance sheet data, quarterly averages:
Total loans $ 16,729,734 15,957,466 15,520,255 15,016,642 9,817,139 8,558,267
Securities 2,970,267 2,829,604 2,850,322 2,741,493 1,798,334 1,440,917
Total earning assets 20,142,402 19,122,163 18,809,744 18,137,904 11,885,118 10,261,974
Total assets 23,236,945 22,204,599 21,933,500 21,211,459 13,335,359 11,421,654
Noninterest-bearing deposits 4,270,459 4,304,186 4,165,876 3,953,855 2,746,499 2,434,875
Total deposits 16,949,374 16,280,581 16,091,700 15,828,480 10,394,267 9,099,472
Securities sold under agreements to repurchase 123,447 129,969 134,983 160,726 99,763 79,681
FHLB advances 1,884,828 1,584,281 1,465,145 1,059,032 399,083 212,951
Subordinated debt and other borrowings 474,328 471,029 477,103 473,805 375,249 355,082
Total stockholders' equity 3,795,963 3,732,633 3,706,741 3,655,029 2,057,505 1,657,072
 
Statement of operations data, for the three months ended:
Interest income $ 230,984 211,528 208,085 202,167 123,743 102,143
Interest expense 48,748       37,057       33,354       28,985       17,116       13,376  
Net interest income 182,236 174,471 174,731 173,182 106,627 88,767
Provision for loan losses 9,402       6,931       6,281       6,920       6,812       3,651  
Net interest income after provision for loan losses 172,834 167,540 168,450 166,262 99,815 85,116
Noninterest income 47,939 44,183 36,488 42,977 35,057 30,382
Noninterest expense 110,908       108,580       122,973       109,736       71,798       62,054  
Income before taxes 109,865 103,143 81,965 99,503 63,074 53,444
Income tax expense 23,000       19,633       55,167       35,060       19,988       13,791  
Net income $ 86,865       83,510       26,798       64,443       43,086       39,653  
 
Profitability and other ratios:
Return on avg. assets (1) 1.50 % 1.53 % 0.48 % 1.21 % 1.30 % 1.41 %
Return on avg. common equity (1) 9.18 % 9.07 % 2.87 % 6.99 % 8.40 % 9.70 %
Return on avg. tangible common equity (1) 18.01 % 18.12 % 5.76 % 14.25 % 13.58 % 14.74 %
Dividend payout ratio (16) 16.57 % 18.36 % 20.00 % 17.34 % 18.01 % 18.67 %

Net interest margin (1)(2)

3.69 % 3.77 % 3.76 % 3.87 % 3.68 % 3.60 %
Noninterest income to total revenue (3) 20.83 % 20.21 % 17.27 % 19.88 % 24.74 % 25.50 %
Noninterest income to avg. assets (1) 0.83 % 0.81 % 0.66 % 0.80 % 1.05 % 1.08 %
Noninterest exp. to avg. assets (1) 1.91 % 1.98 % 2.22 % 2.05 % 2.16 % 2.20 %

Noninterest expense (excluding ORE expenses and merger-related charges) to avg. assets (1)

1.85 % 1.90 % 1.87 % 1.88 % 2.06 % 2.17 %
Efficiency ratio (4) 48.18 % 49.66 % 58.22 % 50.77 % 50.67 % 52.08 %
Loans to deposits 95.44 % 98.93 % 95.02 % 96.64 % 93.66 % 93.12 %
Securities to total assets 12.40 % 13.00 % 11.42 % 13.31 % 11.72 % 13.69 %
 
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
         
(dollars in thousands) Three months ended Three months ended
June 30, 2018 June 30, 2017

Average

Balances

    Interest    

Rates/

Yields

Average

Balances

    Interest    

Rates/

Yields

Interest-earning assets                

Loans (1)

$ 16,729,734 $ 208,758 5.04 % $ 9,817,139 $ 112,320 4.66 %
Securities
Taxable 1,792,845 11,748 2.63 % 1,487,806 8,265 2.23 %
Tax-exempt (2) 1,177,422 8,350 3.34 % 310,528 2,235 3.87 %
Federal funds sold and other 442,401       2,128       1.93 % 269,645       923       1.37 %
Total interest-earning assets 20,142,402 $ 230,984       4.66 % 11,885,118 $ 123,743       4.21 %
Nonearning assets
Intangible assets 1,860,868 784,603
Other nonearning assets 1,233,675   665,638  
Total assets $ 23,236,945   $ 13,335,359  
 
Interest-bearing liabilities
Interest-bearing deposits:
Interest bearing demand deposits $ 805,798 $ 2,135 1.06 % $ 528,059 $ 846 0.64 %
Interest checking 2,232,908 4,260 0.77 % 1,507,548 1,681 0.45 %
Savings and money market 6,739,430 16,165 0.96 % 4,470,577 5,997 0.54 %
Time 2,900,779       10,207       1.41 % 1,141,584       2,470       0.87 %
Total interest-bearing deposits 12,678,915 32,767 1.04 % 7,647,768 10,994 0.58 %
Securities sold under agreements to repurchase 123,447 144 0.47 % 99,763 79 0.32 %
Federal Home Loan Bank advances 1,884,828 9,690 2.06 % 399,083 1,485 1.49 %
Subordinated debt and other borrowings 474,328       6,147       5.20 % 375,249       4,558       4.87 %
Total interest-bearing liabilities 15,161,518 48,748 1.29 % 8,521,863 17,116 0.81 %
Noninterest-bearing deposits 4,270,459               2,746,499              
Total deposits and interest-bearing liabilities 19,431,977 $ 48,748       1.01 % 11,268,362 $ 17,116       0.61 %
Other liabilities 9,005 9,492
Stockholders' equity 3,795,963   2,057,505  
Total liabilities and stockholders' equity $ 23,236,945   $ 13,335,359  
Net interest income $ 182,236   $ 106,627  
Net interest spread (3) 3.37 % 3.40 %
Net interest margin (4) 3.69 % 3.68 %
 
(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, 2018 would have been 3.66% compared to a net interest spread of 3.60% for the quarter ended June 30, 2017.
(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
         
(dollars in thousands) Six months ended Six months ended
June 30, 2018 June 30, 2017

Average

Balances

    Interest    

Rates/

Yields

Average

Balances

    Interest    

Rates/

Yields

Interest-earning assets                

Loans (1)

$ 16,345,734 $ 399,972 4.98 % $ 9,191,181 $ 205,538 4.58 %
Securities
Taxable 1,793,619 22,970 2.58 % 1,346,093 14,698 2.20 %
Tax-exempt (2) 1,106,705 15,635 3.33 % 274,519 3,913 3.85 %
Federal funds sold and other 389,043       3,935       2.04 % 266,533       1,737       1.31 %
Total interest-earning assets 19,635,101 $ 442,512       4.61 % 11,078,326 $ 225,886       4.14 %
Nonearning assets
Intangible assets 1,862,294 676,015
Other nonearning assets 1,226,229   629,450  
Total assets $ 22,723,624   $ 12,383,791  
 
Interest-bearing liabilities
Interest-bearing deposits:
Interest bearing demand deposits $ 790,426 $ 3,917 1.00 % $ 522,577 $ 1,499 0.58 %
Interest checking 2,215,902 7,592 0.69 % 1,454,714 2,907 0.40 %
Savings and money market 6,597,734 28,153 0.86 % 4,187,024 10,450 0.50 %
Time 2,725,534       17,086       1.26 % 994,583       4,257       0.86 %

Total interest-bearing deposits

12,329,596 56,748 0.93 % 7,158,898 19,113 0.54 %
Securities sold under agreements to repurchase 126,690 273 0.43 % 89,777 128 0.29 %
Federal Home Loan Bank advances 1,735,385 16,697 1.94 % 306,531 2,389 1.57 %
Subordinated debt and other borrowings 475,066       12,087       5.13 % 371,222       8,862       4.81 %
Total interest-bearing liabilities 14,666,737 85,805 1.18 % 7,926,428 30,492 0.78 %
Noninterest-bearing deposits 4,287,229               2,591,548              
Total deposits and interest-bearing liabilities 18,953,966 $ 85,805       0.91 % 10,517,976 $ 30,492       0.58 %
Other liabilities 5,185 7,419
Stockholders' equity 3,764,473   1,858,396  
Total liabilities and stockholders' equity $ 22,723,624   $ 12,383,791  
Net interest income $ 356,707   $ 195,394  
Net interest spread (3) 3.43 % 3.37 %
Net interest margin (4) 3.73 % 3.64 %
 
(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 six months ended June 30, 2018 would have been 3.70% compared to a net interest spread of 3.72% for the six months ended June 30, 2017.
(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
                         
(dollars in thousands) June March December September June March
2018     2018     2017     2017     2017     2017
Asset quality information and ratios:
Nonperforming assets:
Nonaccrual loans $ 70,887 70,202 57,455 53,414 40,217 25,051

Other real estate (ORE) and other nonperforming assets (NPAs)

20,229       24,533       28,028       24,682       25,153       6,235  
Total nonperforming assets $ 91,116       $ 94,735       $ 85,483       $ 78,096       $ 65,370       $ 31,286  
Past due loans over 90 days and still accruing interest $ 1,572 1,131 4,139 3,010 1,691 1,110
Accruing troubled debt restructurings (5) $ 5,647 6,115 6,612 15,157 14,248 14,591
Accruing purchase credit impaired loans $ 22,993 24,398 26,719 29,254 34,874
Net loan charge-offs $ 3,936 3,967 4,200 3,705 3,218 4,282
Allowance for loan losses to nonaccrual loans 106.7 % 100.0 % 117.0 % 122.0 % 154.0 % 232.9 %
As a percentage of total loans:
Past due accruing loans over 30 days 0.23 % 0.24 % 0.38 % 0.24 % 0.20 % 0.17 %
Potential problem loans (6) 1.00 % 0.97 % 1.05 % 0.97 % 1.26 % 1.27 %
Allowance for loan losses 0.44 % 0.43 % 0.43 % 0.43 % 0.42 % 0.68 %
Nonperforming assets to total loans, ORE and other NPAs 0.53 % 0.58 % 0.55 % 0.51 % 0.44 % 0.36 %
Nonperforming assets to total assets 0.38 % 0.41 % 0.38 % 0.36 % 0.31 % 0.27 %
Classified asset ratio (Pinnacle Bank) (8) 12.6 % 12.6 % 12.9 % 12.7 % 14.2 % 12.9 %
Annualized net loan charge-offs to avg. loans (7) 0.10 % 0.10 % 0.13 % 0.14 % 0.17 % 0.20 %
Wtd. avg. commercial loan internal risk ratings (6) 4.4 4.4 4.5 4.5 4.5 4.5
 
Interest rates and yields:
Loans 5.04 % 4.91 % 4.87 % 4.91 % 4.66 % 4.49 %
Securities 2.91 % 2.87 % 2.68 % 2.64 % 2.51 % 2.44 %
Total earning assets 4.66 % 4.56 % 4.46 % 4.50 % 4.21 % 4.06 %
Total deposits, including non-interest bearing 0.78 % 0.60 % 0.53 % 0.48 % 0.42 % 0.36 %
Securities sold under agreements to repurchase 0.47 % 0.40 % 0.38 % 0.37 % 0.32 % 0.25 %
FHLB advances 2.06 % 1.79 % 1.64 % 1.48 % 1.49 % 1.72 %
Subordinated debt and other borrowings 5.20 % 5.11 % 4.83 % 4.84 % 4.87 % 4.92 %
Total deposits and interest-bearing liabilities 1.01 % 0.81 % 0.73 % 0.66 % 0.61 % 0.56 %
 
Capital ratios (8):
Pinnacle Financial ratios:
Stockholders' equity to total assets 16.0 % 16.3 % 16.7 % 16.9 % 17.3 % 14.7 %
Common equity Tier one 9.3 % 9.2 % 9.2 % 9.4 % 9.5 % 9.8 %
Tier one risk-based 9.3 % 9.2 % 9.2 % 9.4 % 9.5 % 10.6 %
Total risk-based 12.0 % 12.0 % 12.0 % 12.3 % 12.6 % 13.7 %
Leverage 8.8 % 8.8 % 8.7 % 8.9 % 14.5 % 10.3 %
Tangible common equity to tangible assets 8.9 % 9.0 % 9.1 % 9.1 % 9.2 % 10.4 %
Pinnacle Bank ratios:
Common equity Tier one 10.2 % 10.3 % 10.3 % 10.7 % 11.0 % 11.1 %
Tier one risk-based 10.2 % 10.3 % 10.3 % 10.7 % 11.0 % 11.1 %
Total risk-based 11.2 % 11.3 % 11.4 % 11.8 % 12.1 % 12.9 %
Leverage 9.7 % 9.8 % 9.7 % 10.1 % 16.7 % 10.9 %

Construction and land development loans as a percent of total capital (19)

94.6 % 96.1 % 89.4 % 88.1 % 85.1 % 75.2 %

Non-owner occupied commercial real estate and multi-family as a percent of total capital (19)

304.3 % 306.2 % 297.1 % 289.1 % 286.4 % 220.9 %
 
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, except per share data) June March December September June March
  2018     2018     2017     2017     2017     2017
 
Per share data:
Earnings – basic $ 1.13 1.08 0.35 0.84 0.81 0.83
Earnings – diluted $ 1.12 1.08 0.35 0.83 0.80 0.82
Common dividends per share $ 0.14 0.14 0.14 0.14 0.14 0.14
Book value per common share at quarter end (9) $ 49.15 48.16 47.70 47.31 46.56 34.61
Tangible book value per common share at quarter end (9) $ 25.28 24.24 23.71 23.32 22.58 23.25
Revenue per diluted share $ 2.97 2.83 2.73 2.80 2.64 2.46
Revenue per diluted share, excluding investment (gains) losses on sale of securities, net $ 2.97 2.83 2.83 2.80 2.64 2.46
Noninterest expense per diluted share $ 1.43 1.40 1.59 1.42 1.34 1.28
Noninterest expense per diluted share, excluding the impact of other real estate expense and merger-related charges $ 1.38 1.34 1.34 1.30 1.28 1.26