Press Release

PNFP Reports Diluted EPS of $0.37, ROAA of 0.40% and ROTCE of 4.48% For 1Q 2020

Company Release - 4/20/2020 6:00 PM ET

Excluding non-GAAP adjustments, 1Q 2020 diluted EPS was $0.39, ROAA was 0.42% and ROTCE was 4.71%

NASHVILLE, Tenn.--(BUSINESS WIRE)-- Pinnacle Financial Partners, Inc. (Nasdaq/NGS: PNFP) reported net income per diluted common share of $0.37 for the quarter ended March 31, 2020, compared to net income per diluted common share of $1.22 for the quarter ended March 31, 2019, a decrease of 69.7 percent. Excluding gains and losses on the sale of investment securities and ORE expense for the three months ended March 31, 2020 and 2019, net income per diluted common share was $0.39 in 2020, compared to $1.24 in 2019, a year-over-year decrease of 68.5 percent. Pinnacle also reported that based on an initial assessment of the impact of the pandemic to its loan portfolio, it increased its allowance for credit losses by $86 million during the first quarter of 2020. As a result, Pinnacle's allowance for loan losses to total loans increased to 1.09 percent of its loans at March 31, 2020.

"We have historically set high performing targets and executed with discipline," said M. Terry Turner, Pinnacle's president and chief executive officer. "2020 began in much the same way. Nevertheless, during the quarter, our primary focus became protecting our associates, clients, communities and shareholders from the rapidly progressing COVID-19 pandemic. Things like building on-balance sheet liquidity and significantly increasing our allowance for credit losses in response to potential impacts of the COVID-19 pandemic superseded previous operating plans and impacted operations. Even so, during the quarter we saw improvement on important initiatives like growing low cost core deposits, lowering our cost of funds and growing our fee income."

BALANCE SHEET GROWTH:

  • Loans at March 31, 2020 were $20.4 billion, an increase of $2.2 billion from March 31, 2019, reflecting year-over-year growth of 12.2 percent. Loans at March 31, 2020 increased $609.0 million from Dec. 31, 2019, reflecting a linked-quarter annualized growth rate of 12.3 percent.
    • Average loans were $20.0 billion for the three months ended March 31, 2020, up $409.7 million from $19.6 billion for the three months ended Dec. 31, 2019, a linked-quarter annualized growth rate of 8.4 percent.
    • At March 31, 2020, the remaining discount associated with fair value accounting adjustments on acquired loans was $43.9 million, compared to $55.1 million at Dec. 31, 2019.
  • Deposits at March 31, 2020 were a record $21.3 billion, an increase of $2.9 billion from March 31, 2019, reflecting year-over-year growth of 15.4 percent. Deposits at March 31, 2020 increased $1.2 billion from Dec. 31, 2019, reflecting a linked-quarter annualized growth rate of 22.8 percent.
    • Average deposits were $20.7 billion for the three months ended March 31, 2020, compared to $20.1 billion for the three months ended Dec. 31, 2019, a linked-quarter annualized growth rate of 12.0 percent.
    • Core deposits were $18.6 billion at March 31, 2020, compared to $16.3 billion at March 31, 2019 and $17.6 billion at Dec. 31, 2019. The linked-quarter annualized growth rate of core deposits in the first quarter of 2020 was 22.4 percent.

"Traditionally, our firm has produced outsized growth predicated on our unique ability to attract great bankers to our firm," Turner said. "There is no doubt that our significant growth in loans and core deposits during the first quarter was aided by client reactions to potential impacts of COVID-19. However, interim numbers during the quarter, prior to any recognizable impact of the pandemic, would suggest that our initiatives to produce meaningful growth, particularly in core deposits, were yielding better than planned results."

PROFITABILITY:

  • Return on average assets was 0.40 percent for the first quarter of 2020, compared to 1.38 percent for the fourth quarter of 2019 and 1.52 percent for the first quarter of 2019. First quarter 2020 return on average tangible assets amounted to 0.43 percent, compared to 1.48 percent for the fourth quarter of 2019 and 1.64 percent for the first quarter of 2019.
    • Excluding gains and losses on the sale of investment securities and ORE expenses for both 2020 and 2019, return on average assets was 0.42 percent for the first quarter of 2020, compared to 1.39 percent for the fourth quarter of 2019 and 1.55 percent for the first quarter of 2019. Likewise, excluding those same adjustments, the firm’s return on average tangible assets was 0.45 percent for the first quarter of 2020, compared to 1.49 percent for the fourth quarter of 2019 and 1.67 percent for the first quarter of 2019.
  • Return on average common equity for the first quarter of 2020 amounted to 2.58 percent, compared to 8.78 percent for the fourth quarter of 2019 and 9.49 percent for the first quarter of 2019. First quarter 2020 return on average tangible common equity amounted to 4.48 percent, compared to 15.41 percent for the fourth quarter of 2019 and 17.60 percent for the first quarter of 2019.
    • Excluding gains and losses on the sale of investment securities and ORE expenses for both 2020 and 2019, return on average tangible common equity amounted to 4.71 percent for the first quarter of 2020, compared to 15.49 percent for the fourth quarter of 2019 and 17.91 percent for the first quarter of 2019.

"Profitability metrics were obviously influenced during the quarter by COVID-19 and its impact on our provision for loan losses," said Harold R. Carpenter, Pinnacle's chief financial officer. "The pandemic contributed to an incremental reserve build of approximately $86 million in the first quarter. On the other hand, we are pleased with our ongoing business flows as loan and deposit growth and fee revenues exceeded our expectations. Commercial loan growth is inclusive of approximately $257.4 million in increased commercial loan draw requests over the amounts at the end of the year. More importantly to our long-term strategic plans, deposit inflows were strong all quarter and we ended the quarter with almost $1.2 billion in deposit growth at March 31, 2020. Several fee categories increased meaningfully during the quarter as total noninterest income increased $10.9 million from the fourth quarter of 2019, or $10.5 million when excluding investment gains in each period."

MAINTAINING A STRONG BALANCE SHEET:

  • Net charge-offs were $10.2 million for the quarter ended March 31, 2020, compared to $3.5 million for the quarter ended Dec. 31, 2019 and $3.6 million for the quarter ended March 31, 2019. Annualized net charge-offs as a percentage of average loans for the quarter ended March 31, 2020 were 0.20 percent, compared to 0.07 percent for the quarter ended Dec. 31, 2019 and 0.08 percent for the first quarter of 2019.
  • Nonperforming assets increased to 0.48 percent of total loans and ORE at March 31, 2020, compared to 0.46 percent at Dec. 31, 2019 and decreased compared to 0.61 percent at March 31, 2019. Nonperforming assets were $98.2 million at March 31, 2020, compared to $91.1 million at Dec. 31, 2019 and $111.3 million at March 31, 2019.
  • The classified asset ratio at March 31, 2020 was 12.0 percent, compared to 13.4 percent at Dec. 31, 2019 and 13.0 percent at March 31, 2019. Classified assets were $350.1 million at March 31, 2020, compared to $371.3 million at Dec. 31, 2019 and $306.8 million at March 31, 2019.
  • The allowance for loan losses represented 1.09 percent of total loans at March 31, 2020, compared to 0.48 percent at Dec. 31, 2019 and 0.48 percent at March 31, 2019.
    • The ratio of the allowance for loan losses to nonperforming loans increased to 313.5 percent at March 31, 2020, from 153.8 percent at Dec. 31, 2019 and 90.7 percent at March 31, 2019. At March 31, 2020, purchased credit deteriorated loans of $10.2 million, which were recorded at fair value upon acquisition, represented 14.4 percent of the firm's nonperforming loans.
    • Provision for credit losses was $99.9 million in the first quarter of 2020, compared to $4.6 million in the fourth quarter of 2019 and $7.2 million in the first quarter of 2019.

"Net charge-offs increased by $6.6 million due in large part to a partial charge-off of one commercial credit which has been heavily impacted by the pandemic," Carpenter said. "Classified assets were actually down from Dec. 31, 2019 while nonperforming assets increased modestly during the quarter.

"We have been spending a great deal of time over the past few weeks addressing several focus segments within our loan portfolio that we believe are being the most impacted by COVID-19, namely hospitality, restaurants, retail and entertainment. We’ve also been working with borrowers who request payment deferrals as well as helping clients who are applying for loans under the SBA’s Paycheck Protection Program. We are in the initial stages of evaluating how meaningful the pandemic has been on the various segments of the economy where we have lending exposure. While loan losses will likely materialize, our reviews thus far give us confidence in the quality of our client selection processes and underwriting.

"Additionally, the implementation of CECL as of January 1, 2020, impacted our allowance for loan losses by 19 basis points on day one. Our CECL model is largely influenced by economic factors including most notably the anticipated national unemployment rate, GDP and other metrics. As a result of these deteriorating economic factors, as well as the usual matters impacting our provision, our provision for credit losses increased by $95.2 million in the first quarter of 2020."

REVENUES:

  • Revenues for the quarter ended March 31, 2020 were $263.9 million, an increase of $10.3 million from the $253.6 million recognized in the fourth quarter of 2019 and up $25.6 million from the first quarter of 2019. This represents a year-over-year growth rate of 10.8 percent.
    • Revenue per fully diluted share was $3.47 for the three months ended March 31, 2020, compared to $3.32 for the fourth quarter of 2019 and $3.09 for the first quarter of 2019.
  • Net interest income for the quarter ended March 31, 2020 was $193.6 million, compared to $194.2 million for the fourth quarter of 2019 and $187.2 million for the first quarter of 2019, a year-over-year growth rate of 3.4 percent. Net interest margin was 3.28 percent for the first quarter of 2020, compared to 3.35 percent for the fourth quarter of 2019 and 3.62 percent for the first quarter of 2019.
    • Included in net interest income for the first quarter of 2020 was $7.4 million of discount accretion associated with fair value adjustments, compared to $10.6 million of discount accretion recognized in the fourth quarter of 2019 and $9.7 million in the first quarter of 2019. There remains $43.9 million of purchase accounting discount accretion as of March 31, 2020.
  • Noninterest income for the quarter ended March 31, 2020 was $70.4 million, compared to $59.5 million for the fourth quarter of 2019 and $51.1 million for the first quarter of 2019, a year-over-year growth rate of 37.8 percent.
    • Wealth management revenues, which include investment, trust and insurance services, were $16.6 million for the quarter ended March 31, 2020, compared to $12.4 million for the fourth quarter of 2019 and $11.7 million for the first quarter of 2019, a year-over-year increase of 42.4 percent.
    • Income from the firm's investment in BHG was $15.6 million for the quarter ended March 31, 2020, up 26.6 percent and 17.3 percent, respectively, compared to $12.3 million for the quarter ended Dec. 31, 2019 and $13.3 million for the quarter ended March 31, 2019.
    • Net gains on mortgage loans sold were $8.6 million during the quarter ended March 31, 2020, up 42.0 percent and 75.9 percent, respectively, compared to $6.0 million for the quarter ended Dec. 31, 2019 and $4.9 million during the quarter ended March 31, 2019.
    • Other noninterest income was $20.1 million for the quarter ended March 31, 2020, compared to $19.5 million for the quarter ended Dec. 31, 2019 and $14.6 million for the quarter ended March 31, 2019, a year-over-year increase of 37.2 percent. Contributing to the year-over-year increase were increases in credit card interchange fees, SBA loan fees, loan swap fees and the value of the firm's bank-owned life insurance policies.

"We are pleased with our net interest margin results in the first quarter, particularly after considering the impact of less discount accretion during the quarter ended March 31, 2020 when compared to the Dec. 31, 2019 quarter," Carpenter said. "We are also pleased with the actions of our relationship managers during the quarter as they were very proactive in lowering deposit rates throughout the quarter. In spite of those actions, core deposits continued to increase at a rapid pace throughout the quarter. During the quarter, we also began increasing our on-balance sheet liquidity position and anticipate further increasing our liquidity position during the second quarter. Obviously, this additional liquidity will have a dilutive impact on our net interest margin in 2020, but its impact on net interest income should be minimal.

"BHG is reporting 17.3 percent earnings growth year-over-year and 26.6 percent earnings growth over the fourth quarter of 2019. During the first quarter, and as BHG began preparing its balance sheet for the current economic climate, BHG elected to place less emphasis on its strategy of holding more loans on its balance sheet and opted to send more loans through its auction platform thus creating more operating revenues in the first quarter than it would have had otherwise. Furthermore, its first quarter earnings were negatively impacted by a significant increase in its reserves for its on-balance sheet loans and its reserves for loans that are subject to substitution losses through its network of community banks."

OTHER HIGHLIGHTS:

  • The firm's efficiency ratio for the first quarter of 2020 increased to 52.04 percent, compared to 51.44 percent for the fourth quarter of 2019 and 47.86 percent in the first quarter of 2019. The ratio of noninterest expenses to average assets was 1.96 percent for the first quarter of 2020, compared to 1.88 percent in the fourth quarter of 2019 and 1.85 percent in the first quarter of 2019.
    • Excluding gains and losses on the sale of investment securities and ORE expenses for both 2020 and 2019, the efficiency ratio was 51.21 percent for the first quarter of 2020, compared to 51.14 percent for the fourth quarter of 2019 and 47.37 percent for the first quarter of 2019. Excluding ORE expense, the ratio of noninterest expense to average assets was 1.92 percent for the first quarter of 2020, compared to 1.86 percent for the fourth quarter of 2019 and 1.84 percent for the first quarter of 2019.
  • Noninterest expense for the quarter ended March 31, 2020 was $137.3 million, compared to $130.5 million in the fourth quarter of 2019 and $114.1 million in the first quarter of 2019, reflecting a year-over-year increase of 20.4 percent. Excluding ORE expense, noninterest expense increased 18.6 percent over the first quarter of 2019.
    • Salaries and employee benefits were $80.5 million in the first quarter of 2020, compared to $81.4 million in the fourth quarter of 2019 and $70.4 million in the first quarter of 2019, reflecting a year-over-year increase of 14.4 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 $4.7 million in the first quarter of 2020, compared to $10.9 million in the fourth quarter of 2019 and $6.3 million in the first quarter of last year.
  • The effective tax rate for the first quarter of 2020 was a benefit of 6.2 percent, compared to expense of 18.9 percent for the fourth quarter of 2019 and 19.7 percent for the first quarter of 2019. The effective tax rate in the first quarter of 2020 was impacted by the tax benefit related to provision expense associated with the COVID-19 pandemic.
  • During the first quarter of 2020, the firm acquired 1.0 million shares of its common stock in open market transactions pursuant to its previously announced share repurchase program, at an average price of $50.01. Since the announcement of the repurchase program, the number of shares acquired has been 2.5 million at an average price of $52.66. The Firm's last transaction to repurchase shares of its common stock was on March 19, 2020, and the company has suspended its share repurchase program at this time.

"Expenses increased in the first quarter of 2020 due in large part to a $5.2 million increase in other noninterest expense attributable to the impact of COVID-19 to our off-balance sheet reserves, primarily for unfunded lines of credit," Carpenter said. "These increases were offset by decreases in salaries and benefits, primarily due to reductions in incentive accruals.

"As we consider expense run rates going into the remainder of 2020, we have eliminated much of our 2020 hiring plan to consider only staffing of our Atlanta buildout, key revenue producer adds in our other markets as well as critical operational positions. We believe our 2020 annualized expense growth will be in the low to mid-single digit percentage increases in comparison to 2019. We are also reducing our targeted cash incentive award for 2020 to a payout of approximately 50 percent. We will continue to evaluate our incentive accruals throughout the year."

WEBCAST AND CONFERENCE CALL INFORMATION

Pinnacle will host a webcast and conference call at 8:30 a.m. CT on April 21, 2020, to discuss first quarter 2020 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 is the No. 1 bank in the Nashville-Murfreesboro-Franklin MSA, according to 2019 deposit data from the FDIC. Pinnacle earned a spot on FORTUNE’s 2019 list of the 100 Best Companies to Work For® in the U.S., its third consecutive appearance. American Banker recognized Pinnacle as one of America’s Best Banks to Work For seven years in a row.

The firm began operations in a single location in downtown Nashville, TN in October 2000 and has since grown to approximately $29.3 billion in assets as of March 31, 2020. As the second-largest bank holding company headquartered in Tennessee, Pinnacle operates in 12 primarily urban markets in Tennessee, the Carolinas, Virginia and Georgia.

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," "may," "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 of Pinnacle Bank and its subsidiaries or BHG resulting in significant increases in loan losses and provisions for those losses and, in the case of BHG, substitutions; (ii) the effects of the emergence of widespread health emergencies or pandemics, including the magnitude and duration of the COVID-19 pandemic and its impact on general economic and financial market conditions and on Pinnacle Financial's and its customers' business, results of operations, asset quality and financial condition; (iii) the ability to grow and retain low-cost core deposits and retain large, uninsured deposits, including during times when Pinnacle Bank is seeking to lower rates it pays on deposits; (iv) 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; (v) changes in loan underwriting, credit review or loss reserve policies associated with economic conditions, examination conclusions, or regulatory developments; (vi) effectiveness of Pinnacle Financial's asset management activities in improving, resolving or liquidating lower-quality assets; (vii) the impact of competition with other financial institutions, including pricing pressures and the resulting impact on Pinnacle Financial’s results, including as a result of compression to net interest margin; (viii) 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; (ix) fluctuations or differences in interest rates on loans or deposits from those that Pinnacle Financial is modeling or anticipating, including as a result of Pinnacle Bank's inability to better match deposit rates with the changes in the short-term rate environment, or that affect the yield curve; (x) the results of regulatory examinations; (xi) Pinnacle Financial's ability to identify potential candidates for, consummate, and achieve synergies from, potential future acquisitions; (xii) difficulties and delays in integrating acquired businesses or fully realizing costs savings and other benefits from acquisitions; (xiii) BHG's ability to profitably grow its business and successfully execute on its business plans; (xiv) risks of expansion into new geographic or product markets including the recent expansion into the Atlanta, Georgia metro market; (xv) any matter that would cause Pinnacle Financial to conclude that there was impairment of any asset, including goodwill or other intangible assets; (xvi) 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 for associates) or otherwise to attract customers from other financial institutions; (xvii) deterioration in the valuation of other real estate owned and increased expenses associated therewith; (xviii) 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 Bank's level of applicable commercial real estate loans were to exceed percentage levels of total capital in guidelines recommended by its regulators; (xix) approval of the declaration of any dividend by Pinnacle Financial's board of directors; (xx) the vulnerability of Pinnacle Bank's network and online banking portals, and the systems of parties with whom Pinnacle Bank contracts, to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss and other security breaches; (xxi) the possibility of increased compliance and operational costs as a result of increased regulatory oversight (including by the Consumer Financial Protection Bureau), 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; (xxii) 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; (xxiii) changes in state and federal legislation, regulations or policies applicable to banks and other financial service providers, like BHG, including regulatory or legislative developments; (xxiv) the availability of and access to capital; (xxv) 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, including as a result of Pinnacle Bank's participation in and execution of government programs related to the COVID-19 pandemic; and (xxvi) 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, earnings per diluted share, efficiency ratio and the ratio of noninterest expense to average assets, excluding in certain instances the impact of expenses related to other real estate owned, gains or losses on sale of investment securities, the charges associated with Pinnacle Financial's branch rationalization project, the sale of the remaining portion of Pinnacle Bank's non-prime automobile portfolio, and other matters for the accounting periods presented. This release also includes non-GAAP financial measures which exclude expenses associated with Pinnacle Bank's merger with BNC. This release may also contain certain other non-GAAP capital ratios and performance measures that exclude the impact of goodwill and core deposit intangibles associated with Pinnacle Financial's acquisitions of BNC, Avenue Bank, 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 2020 versus certain periods in 2019 and to internally prepared projections.

 

PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS – UNAUDITED

(dollars in thousands)

 

 

 

 

March 31, 2020

December 31,
2019

March 31, 2019

ASSETS

 

 

 

Cash and noninterest-bearing due from banks

$

 

181,088

 

$

 

157,901

 

$

 

167,181

 

Restricted cash

 

243,313

 

 

137,045

 

 

101,367

 

Interest-bearing due from banks

 

598,084

 

 

210,784

 

 

210,389

 

Federal funds sold and other

 

1,883

 

 

20,977

 

 

6,560

 

Cash and cash equivalents

 

1,024,368

 

 

526,707

 

 

485,497

 

 

 

 

 

Securities available-for-sale, at fair value

 

3,030,564

 

 

3,539,995

 

 

3,250,006

 

Securities held-to-maturity (fair value of $1.1 billion, net of allowance for credit losses of $148,000 at March 31, 2020, $201.2 million and $199.0 million at March 31, 2020, Dec. 31, 2019 and March 31, 2019, respectively)

 

1,059,257

 

 

188,996

 

 

194,043

 

Consumer loans held-for-sale

 

87,245

 

 

81,820

 

 

53,658

 

Commercial loans held-for-sale

 

6,850

 

 

17,585

 

 

14,456

 

 

 

 

 

Loans

 

20,396,853

 

 

19,787,876

 

 

18,174,906

 

Less allowance for credit losses

 

(222,465

)

 

(94,777

)

 

(87,194

)

Loans, net

 

20,174,388

 

 

19,693,099

 

 

18,087,712

 

 

 

 

 

Premises and equipment, net

 

274,919

 

 

273,932

 

 

262,595

 

Equity method investment

 

285,671

 

 

278,037

 

 

239,861

 

Accrued interest receivable

 

82,198

 

 

84,462

 

 

79,594

 

Goodwill

 

1,819,811

 

 

1,819,811

 

 

1,807,121

 

Core deposits and other intangible assets

 

48,610

 

 

51,130

 

 

43,850

 

Other real estate owned

 

27,182

 

 

29,487

 

 

15,077

 

Other assets

 

1,343,117

 

 

1,220,435

 

 

1,024,388

 

Total assets

$

 

29,264,180

 

$

 

27,805,496

 

$

 

25,557,858

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

Deposits:

 

 

 

Noninterest-bearing

$

 

4,963,415

 

$

 

4,795,476

 

$

 

4,317,787

 

Interest-bearing

 

4,025,382

 

 

3,630,168

 

 

3,170,570

 

Savings and money market accounts

 

8,144,409

 

 

7,813,939

 

 

7,349,496

 

Time

 

4,199,965

 

 

3,941,445

 

 

3,642,608

 

Total deposits

 

21,333,171

 

 

20,181,028

 

 

18,480,461

 

Securities sold under agreements to repurchase

 

186,548

 

 

126,354

 

 

100,698

 

Federal Home Loan Bank advances

 

2,317,520

 

 

2,062,534

 

 

2,121,075

 

Subordinated debt and other borrowings

 

669,658

 

 

749,080

 

 

484,703

 

Accrued interest payable

 

33,931

 

 

42,183

 

 

26,052

 

Other liabilities

 

338,224

 

 

288,569

 

 

288,930

 

Total liabilities

 

24,879,052

 

 

23,449,748

 

 

21,501,919

 

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 authorized; 75.8 million, 76.5 million and 77.1 million shares issued and outstanding at March 31, 2020, Dec. 31, 2019 and March 31, 2019, respectively

 

75,800

 

 

76,564

 

 

77,064

 

Additional paid-in capital

 

3,015,521

 

 

3,064,467

 

 

3,079,358

 

Retained earnings

 

1,168,301

 

 

1,184,183

 

 

914,545

 

Accumulated other comprehensive income (loss), net of taxes

 

125,506

 

 

30,534

 

 

(15,028

)

Total stockholders' equity

 

4,385,128

 

 

4,355,748

 

 

4,055,939

 

Total liabilities and stockholders' equity

$

 

29,264,180

 

$

 

27,805,496

 

$

 

25,557,858

 

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

 

March 31, 2020

December 31, 2019

March 31, 2019

Interest income:

 

 

 

Loans, including fees

$

 

236,420

 

$

 

241,209

$

 

229,379

 

Securities

 

 

 

Taxable

 

10,268

 

 

10,211

 

13,540

 

Tax-exempt

 

13,824

 

 

13,597

 

11,672

 

Federal funds sold and other

 

2,557

 

 

3,436

 

3,292

 

Total interest income

 

263,069

 

 

268,453

 

257,883

 

 

 

 

 

Interest expense:

 

 

 

Deposits

 

50,698

 

 

55,905

 

54,217

 

Securities sold under agreements to repurchase

 

115

 

 

131

 

145

 

FHLB advances and other borrowings

 

18,704

 

 

18,245

 

16,275

 

Total interest expense

 

69,517

 

 

74,281

 

70,637

 

Net interest income

 

193,552

 

 

194,172

 

187,246

 

Provision for credit losses

 

99,889

 

 

4,644

 

7,184

 

Net interest income after provision for credit losses

 

93,663

 

 

189,528

 

180,062

 

 

 

 

 

Noninterest income:

 

 

 

Service charges on deposit accounts

 

9,032

 

 

9,094

 

8,542

 

Investment services

 

9,239

 

 

6,581

 

5,468

 

Insurance sales commissions

 

3,240

 

 

2,017

 

2,928

 

Gains on mortgage loans sold, net

 

8,583

 

 

6,044

 

4,878

 

Investment gains (losses) on sales, net

 

463

 

 

68

 

(1,960

)

Trust fees

 

4,170

 

 

3,835

 

3,295

 

Income from equity method investment

 

15,592

 

 

12,312

 

13,290

 

Other noninterest income

 

20,058

 

 

19,511

 

14,622

 

Total noninterest income

 

70,377

 

 

59,462

 

51,063

 

 

 

 

 

Noninterest expense:

 

 

 

Salaries and employee benefits

 

80,480

 

 

81,444

 

70,376

 

Equipment and occupancy

 

20,978

 

 

21,059

 

19,331

 

Other real estate, net

 

2,415

 

 

804

 

246

 

Marketing and other business development

 

3,251

 

 

4,298

 

2,948

 

Postage and supplies

 

1,990

 

 

2,407

 

1,892

 

Amortization of intangibles

 

2,520

 

 

2,896

 

2,311

 

Other noninterest expense

 

25,715

 

 

17,562

 

16,947

 

Total noninterest expense

 

137,349

 

 

130,470

 

114,051

 

Income before income taxes

 

26,691

 

 

118,520

 

117,074

 

Income tax (benefit) expense

 

(1,665

)

 

22,441

 

23,114

 

Net income

$

 

28,356

 

$

 

96,079

$

 

93,960

 

 

 

 

 

Per share information:

 

 

 

Basic net income per common share

$

 

0.37

 

$

 

1.26

$

 

1.22

 

Diluted net income per common share

$

 

0.37

 

$

 

1.26

$

 

1.22

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

Basic

 

75,803,402

 

 

76,018,739

 

76,803,171

 

Diluted

 

75,966,295

 

 

76,398,982

 

77,127,692

 

 

 

 

 

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)

March

December

September

June

March

December

2020

2019

2019

2019

2019

2018

Balance sheet data, at quarter end:

 

 

 

 

 

 

Commercial and industrial loans

$

 

6,752,317

 

6,290,296

 

6,002,285

 

5,795,107

 

5,419,520

 

5,271,420

 

Commercial real estate - owner occupied

 

2,650,170

 

2,669,766

 

2,595,837

 

2,624,160

 

2,617,541

 

2,653,433

 

Commercial real estate - investment

 

4,520,234

 

4,418,658

 

4,443,687

 

4,252,098

 

4,107,953

 

3,855,643

 

Commercial real estate - multifamily and other

 

550,338

 

620,794

 

669,721

 

709,135

 

693,652

 

655,879

 

Consumer real estate - mortgage loans

 

3,106,465

 

3,068,625

 

3,025,502

 

2,949,755

 

2,887,628

 

2,844,447

 

Construction and land development loans

 

2,520,937

 

2,430,483

 

2,253,303

 

2,117,969

 

2,097,570

 

2,072,455

 

Consumer and other

 

296,392

 

289,254

 

355,307

 

366,094

 

351,042

 

354,272

 

Total loans

 

20,396,853

 

19,787,876

 

19,345,642

 

18,814,318

 

18,174,906

 

17,707,549

 

Allowance for loan losses

 

(222,465

)

(94,777

)

(93,647

)

(90,253

)

(87,194

)

(83,575

)

Securities

 

4,089,821

 

3,728,991

 

3,583,119

 

3,447,834

 

3,444,049

 

3,277,968

 

Total assets

 

29,264,180

 

27,805,496

 

27,547,834

 

26,540,355

 

25,557,858

 

25,031,044

 

Noninterest-bearing deposits

 

4,963,415

 

4,795,476

 

4,702,155

 

4,493,419

 

4,317,787

 

4,309,067

 

Total deposits

 

21,333,171

 

20,181,028

 

20,000,677

 

19,449,383

 

18,480,461

 

18,849,107

 

Securities sold under agreements to repurchase

 

186,548

 

126,354

 

95,402

 

154,169

 

100,698

 

104,741

 

FHLB advances

 

2,317,520

 

2,062,534

 

2,052,548

 

1,960,062

 

2,121,075

 

1,443,589

 

Subordinated debt and other borrowings

 

669,658

 

749,080

 

750,488

 

464,144

 

484,703

 

485,130

 

Total stockholders' equity

 

4,385,128

 

4,355,748

 

4,294,630

 

4,176,361

 

4,055,939

 

3,965,940

 

Balance sheet data, quarterly averages:

 

 

 

 

 

 

Total loans

$

 

20,009,288

 

19,599,620

 

19,216,835

 

18,611,164

 

17,938,480

 

17,630,281

 

Securities

 

3,814,543

 

3,662,829

 

3,507,363

 

3,412,475

 

3,302,676

 

3,148,638

 

Federal funds sold and other

 

807,796

 

717,927

 

802,326

 

530,556

 

469,909

 

645,644

 

Total earning assets

 

24,631,627

 

23,980,376

 

23,526,524

 

22,554,195

 

21,711,065

 

21,424,563

 

Total assets

 

28,237,642

 

27,604,774

 

27,134,163

 

25,915,971

 

25,049,954

 

24,616,733

 

Noninterest-bearing deposits

 

4,759,729

 

4,834,694

 

4,574,821

 

4,399,766

 

4,195,443

 

4,317,782

 

Total deposits

 

20,679,455

 

20,078,594

 

19,778,007

 

18,864,859

 

18,358,094

 

18,368,012

 

Securities sold under agreements to repurchase

 

141,192

 

109,127

 

134,197

 

117,261

 

109,306

 

119,247

 

FHLB advances

 

2,029,888

 

1,992,213

 

2,136,928

 

2,164,341

 

1,926,358

 

1,689,920

 

Subordinated debt and other borrowings

 

673,415

 

753,244

 

533,194

 

469,498

 

470,775

 

469,074

 

Total stockholders' equity

 

4,417,155

 

4,343,246

 

4,265,006

 

4,117,754

 

4,017,375

 

3,939,927

 

Statement of operations data, for the three months ended:

Interest income

$

 

263,069

 

268,453

 

275,749

 

265,851

 

257,883

 

256,095

 

Interest expense

 

69,517

 

74,281

 

79,943

 

76,933

 

70,637

 

65,880

 

Net interest income

 

193,552

 

194,172

 

195,806

 

188,918

 

187,246

 

190,215

 

Provision for credit losses

 

99,889

 

4,644

 

8,260

 

7,195

 

7,184

 

9,319

 

Net interest income after provision for credit losses

 

93,663

 

189,528

 

187,546

 

181,723

 

180,062

 

180,896

 

Noninterest income

 

70,377

 

59,462

 

82,619

 

70,682

 

51,063

 

57,270

 

Noninterest expense

 

137,349

 

130,470

 

132,941

 

127,686

 

114,051

 

119,409

 

Income before taxes

 

26,691

 

118,520

 

137,224

 

124,719

 

117,074

 

118,757

 

Income tax (benefit) expense

 

(1,665

)

22,441

 

26,703

 

24,398

 

23,114

 

23,439

 

Net income

$

 

28,356

 

96,079

 

110,521

 

100,321

 

93,960

 

95,318

 

 

 

 

 

 

 

 

Profitability and other ratios:

 

 

 

 

 

 

Return on avg. assets (1)

 

0.40

%

1.38

%

1.62

%

1.55

%

1.52

%

1.54

%

Return on avg. common equity (1)

 

2.58

%

8.78

%

10.28

%

9.77

%

9.49

%

9.60

%

Return on avg. tangible common equity (1)

 

4.48

%

15.41

%

18.28

%

17.74

%

17.60

%

18.14

%

Dividend payout ratio (16)

 

14.61

%

12.24

%

12.31

%

12.88

%

13.39

%

13.79

%

Net interest margin (2)

 

3.28

%

3.35

%

3.43

%

3.48

%

3.62

%

3.63

%

Noninterest income to total revenue (3)

 

26.67

%

23.44

%

29.67

%

27.23

%

21.43

%

23.14

%

Noninterest income to avg. assets (1)

 

1.00

%

0.85

%

1.21

%

1.09

%

0.83

%

0.92

%

Noninterest exp. to avg. assets (1)

 

1.96

%

1.88

%

1.94

%

1.98

%

1.85

%

1.92

%

Efficiency ratio (4)

 

52.04

%

51.44

%

47.75

%

49.19

%

47.86

%

48.25

%

Avg. loans to avg. deposits

 

96.76

%

97.61

%

97.16

%

98.66

%

97.71

%

95.98

%

Securities to total assets

 

13.98

%

13.41

%

13.01

%

12.99

%

13.48

%

13.10

%

 

 

 

 

 

 

 

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

March 31, 2020

March 31, 2019

 

Average
Balances

Interest

Rates/
Yields

Average
Balances

Interest

Rates/
Yields

Interest-earning assets

 

 

 

 

 

 

Loans (1) (2)

$

 

20,009,288

$

 

236,420

4.84

%

$

 

17,938,480

$

 

229,379

5.28

%

Securities

 

 

 

 

 

 

Taxable

 

1,924,629

 

10,268

2.15

%

 

1,845,927

 

13,540

2.97

%

Tax-exempt (2)

 

1,889,914

 

13,824

3.51

%

 

1,456,749

 

11,672

3.87

%

Federal funds sold and other

 

807,796

 

2,557

1.27

%

 

469,909

 

3,292

2.84

%

Total interest-earning assets

 

24,631,627

$

 

263,069

4.41

%

 

21,711,065

$

 

257,883

4.94

%

Nonearning assets

 

 

 

 

 

 

Intangible assets

 

1,870,063

 

 

 

1,852,451

 

 

Other nonearning assets

 

1,735,952

 

 

 

1,486,438

 

 

Total assets

$

 

28,237,642

 

 

$

 

25,049,954

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities

 

 

 

 

 

 

Interest-bearing deposits:

 

 

 

 

 

 

Interest checking

 

3,745,280

 

8,467

0.91

%

 

3,130,492

 

9,323

1.21

%

Savings and money market

 

8,097,549

 

20,435

1.01

%

 

7,539,052

 

26,336

1.42

%

Time

 

4,076,897

 

21,796

2.15

%

 

3,493,107

 

18,558

2.15

%

Total interest-bearing deposits

 

15,919,726

 

50,698

1.28

%

 

14,162,651

 

54,217

1.55

%

Securities sold under agreements to repurchase

 

141,192

 

115

0.33

%

 

109,306

 

145

0.54

%

Federal Home Loan Bank advances

 

2,029,888

 

10,407

2.06

%

 

1,926,358

 

9,963

2.10

%

Subordinated debt and other borrowings

 

673,415

 

8,297

4.96

%

 

470,775

 

6,312

5.44

%

Total interest-bearing liabilities

 

18,764,221

 

69,517

1.49

%

 

16,669,090

 

70,637

1.72

%

Noninterest-bearing deposits

 

4,759,729

 

4,195,443

Total deposits and interest-bearing liabilities

 

23,523,950

$

 

69,517

1.19

%

 

20,864,533

$

 

70,637

1.37

%

Other liabilities

 

296,537

 

 

 

168,046

 

 

Stockholders' equity

 

4,417,155

 

 

 

4,017,375

 

 

Total liabilities and stockholders' equity

$

 

28,237,642

 

 

$

 

25,049,954

 

 

Netinterestincome

 

$

 

193,552

 

 

$

 

187,246

 

Net interest spread (3)

 

 

2.92

%

 

 

3.22

%

Net interest margin (4)

 

 

3.28

%

 

 

3.62

%

 

 

 

 

 

 

 

(1) Average balances of nonperforming loans are included in the above amounts.

(2) Yields computed on tax-exempt instruments on a tax equivalent basis and included $7.0 million of taxable equivalent income for the three months ended Mar. 31, 2020 compared to $6.5 million for the three months ended Mar. 31, 2019. The tax-exempt benefit has been reduced by the projected impact of tax-exempt income that will be disallowed pursuant to IRS Regulations as of and for the then current period presented.

(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 three months ended Mar. 31, 2020 would have been 3.22% compared to a net interest spread of 3.57% for the three months ended Mar. 31, 2019.

(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)

March

December

September

June

March

December

2020

2019

2019

2019

2019

2018

Asset quality information and ratios:

 

 

 

 

 

 

Nonperforming assets:

 

 

 

 

 

 

Nonaccrual loans

 

70,970

 

61,605

 

73,263

 

76,077

 

96,144

 

87,834

 

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

 

27,182

 

29,487

 

30,049

 

26,658

 

15,138

 

15,393

 

Total nonperforming assets

$

 

98,152

 

91,092

 

103,312

 

102,735

 

111,282

 

103,227

 

Past due loans over 90 days and still accruing interest

$

 

1,990

 

1,615

 

2,450

 

2,733

 

1,982

 

1,558

 

Accruing troubled debt restructurings (5)

$

 

3,869

 

4,850

 

5,803

 

7,412

 

5,481

 

5,899

 

Accruing purchase credit impaired loans

$

 

13,984

 

13,249

 

12,887

 

12,632

 

13,122

 

14,743

 

Net loan charge-offs

$

 

10,155

 

3,515

 

4,866

 

4,136

 

3,565

 

5,729

 

Allowance for credit losses to nonaccrual loans

 

313.5

%

153.8

%

127.8

%

118.6

%

90.7

%

95.2

%

As a percentage of total loans:

 

 

 

 

 

 

Past due accruing loans over 30 days

 

0.17

%

0.18

%

0.24

%

0.21

%

0.22

%

0.34

%

Potential problem loans (6)

 

1.22

%

1.39

%

1.31

%

1.21

%

1.05

%

1.00

%

Allowance for loan losses (20)

 

1.09

%

0.48

%

0.48

%

0.48

%

0.48

%

0.47

%

Nonperforming assets to total loans, ORE and other NPAs

 

0.48

%

0.46

%

0.53

%

0.55

%

0.61

%

0.58

%

Classified asset ratio (Pinnacle Bank) (8)

 

12.0

%

13.4

%

13.5

%

13.9

%

13.0

%

12.4

%

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

 

0.20

%

0.07

%

0.10

%

0.09

%

0.08

%

0.11

%

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

 

45.0

 

44.9

 

45.3

 

44.9

 

44.9

 

44.4

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rates and yields:

 

 

 

 

 

 

Loans

 

4.84

%

5.00

%

5.21

%

5.22

%

5.28

%

5.22

%

Securities

 

2.82

%

2.85

%

3.00

%

3.20

%

3.37

%

3.22

%

Total earning assets

 

4.41

%

4.58

%

4.78

%

4.85

%

4.94

%

4.85

%

Total deposits, including non-interest bearing

 

0.99

%

1.10

%

1.25

%

1.25

%

1.20

%

1.08

%

Securities sold under agreements to repurchase

 

0.33

%

0.48

%

0.45

%

0.49

%

0.54

%

0.50

%

FHLB advances

 

2.06

%

2.10

%

2.15

%

2.14

%

2.10

%

2.18

%

Subordinated debt and other borrowings

 

4.96

%

4.04

%

4.22

%

5.34

%

5.44

%

5.33

%

Total deposits and interest-bearing liabilities

 

1.19

%

1.29

%

1.40

%

1.43

%

1.37

%

1.27

%

 

 

 

 

 

 

 

Capital and other ratios (8):

 

 

 

 

 

 

Pinnacle Financial ratios:

 

 

 

 

 

 

Stockholders' equity to total assets

 

15.0

%

15.7

%

15.6

%

15.7

%

15.9

%

15.8

%

Common equity Tier one

 

9.4

%

9.7

%

9.6

%

9.5

%

9.4

%

9.6

%

Tier one risk-based

 

9.4

%

9.7

%

9.6

%

9.5

%

9.4

%

9.6

%

Total risk-based

 

12.8

%

13.2

%

13.2

%

12.0

%

12.0

%

12.2

%

Leverage

 

8.8

%

9.1

%

8.9

%

9.1

%

9.0

%

8.9

%

Tangible common equity to tangible assets

 

9.2

%

9.6

%

9.4

%

9.4

%

9.3

%

9.1

%

Pinnacle Bank ratios:

 

 

 

 

 

 

Common equity Tier one

 

11.0

%

11.2

%

11.1

%

10.3

%

10.4

%

10.5

%

Tier one risk-based

 

11.0

%

11.2

%

11.1

%

10.3

%

10.4

%

10.5

%

Total risk-based

 

12.2

%

12.2

%

12.1

%

11.3

%

11.4

%

11.5

%

Leverage

 

10.3

%

10.5

%

10.4

%

9.8

%

9.9

%

9.8

%

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

 

84.2

%

83.6

%

79.9

%

82.6

%

84.1

%

85.2

%

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

 

264.1

%

268.3

%

272.8

%

288.9

%

282.5

%

277.7

%

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

(dollars in thousands, except per share data)

 

March

December

September

June

March

December

 

2020

2019

2019

2019

2019

2018

 

 

 

 

 

 

 

 

Per share data:

 

 

 

 

 

 

 

Earnings – basic

$

 

0.37

 

1.26

 

1.45

 

1.31

 

1.22

 

1.24

 

Earnings - basic, excluding non-GAAP adjustments

$

 

0.39

 

1.27

 

1.45

 

1.43

 

1.24

 

1.26

 

Earnings – diluted

$

 

0.37

 

1.26

 

1.44

 

1.31

 

1.22

 

1.23

 

Earnings - diluted, excluding non-GAAP adjustments

$

 

0.39

 

1.27

 

1.45

 

1.42

 

1.24

 

1.25

 

Common dividends per share

$

 

0.16

 

0.16

 

0.16

 

0.16

 

0.16

 

0.16

 

Book value per common share at quarter end (9)

$

 

57.85

 

56.89

 

55.97

 

54.29

 

52.63

 

51.18

 

Tangible book value per common share at quarter end (9)

$

 

33.20

 

32.45

 

31.60

 

30.26

 

28.61

 

27.27

 

Revenue per diluted share

$

 

3.47

 

3.32

 

3.64

 

3.39

 

3.09

 

3.19

 

Revenue per diluted share, excluding non-GAAP adjustments

$

 

3.47

 

3.32

 

3.63

 

3.47