PNFP Reports Fully Diluted EPS Up 20.5% Over Same Quarter Last Year

Pinnacle Financial Partners, Inc. (Nasdaq/NGS: PNFP) today reported net income per fully diluted common share of $0.47 for the quarter ended March 31, 2014, compared to net income per fully diluted common share of $0.39 for the quarter ended March 31, 2013, an increase of 20.5 percent.

“First quarter was another strong quarter of execution against our targets for soundness, profitability and growth,” said M. Terry Turner, Pinnacle’s president and chief executive officer. “At 0.09 percent, the annualized rate of net charge-offs was back to our pre-recession levels. Our return on average assets of 1.20 percent was an all-time high. Average loans outstanding during the first quarter were also at an all-time high, increasing at an annualized growth rate of approximately 15 percent during the quarter.”

GROWING THE CORE EARNINGS CAPACITY OF THE FIRM:

• Loans at March 31, 2014 were a record $4.182 billion, an increase of $37.2 million from Dec. 31, 2013, and $409.3 million from March 31, 2013, reflecting year-over-year growth of 10.9 percent.
• Average balances of noninterest bearing deposit accounts were $1.129 billion in the first quarter of 2014, down 4.3 percent from the fourth quarter of 2013 and up 18.5 percent over the same quarter last year.
• Revenues for the quarter ended March 31, 2014 were a record $58.6 million, an increase from $57.5 million in the fourth quarter of 2013 and up 7.3 percent over the $54.7 million for the same quarter last year.
• The firm’s net interest margin for the quarter ended March 31, 2014 was 3.76 percent, compared to 3.70 percent in the fourth quarter of 2013 and 3.90 percent for the same quarter last year.
• Return on average assets was 1.20 percent for the first quarter of 2014, compared to 1.09 percent for the same quarter last year. First quarter 2014 return on tangible common equity amounted to 13.47 percent, compared to first quarter 2013 amount of 12.41 percent.

“Despite the strong growth in average loans outstanding during the quarter, period ending loans for the first quarter of 2014 were up just $37.2 million, less than the average quarterly growth we expect during 2014 but generally in line with our expectations based on historical first quarter performance trends,” Turner said. “We continue to believe we will meet or exceed the three-year loan growth targets we established for 2012-2014.”

OTHER FIRST QUARTER 2014 HIGHLIGHTS:

• Revenue growth
  • Net interest income for the quarter ended March 31, 2014 was $45.9 million, compared to $45.0 million in the fourth quarter of 2013 and $42.8 million for the first quarter of 2013. Net interest income for the first quarter of 2014 was up 7.4 percent year-over-year and is at its highest quarterly level since the firm’s founding in 2000.
    • Consistent with previously disclosed expectations, the firm’s net interest margin increased to 3.76 percent for the quarter ended March 31, 2014, up from 3.70 percent last quarter and down from 3.90 percent for the quarter ended March 31, 2013.
  • Noninterest income for the quarter ended March 31, 2014 was $12.7 million, compared to $12.5 million for the fourth quarter of 2013 and $11.9 million for the same quarter last year. Noninterest income was up 7.0 percent over the same quarter last year.
    • Wealth management revenues, which include investment services, insurance and trust fees, were $4.7 million during the first quarter of 2014, compared to $4.4 million during the fourth quarter of 2013 and $4.1 million during the same quarter last year.
    • Gains on mortgage loans sold, net of commissions, were $952,000 during the first quarter of 2014, compared to $1.1 million during the fourth quarter of 2013 and $1.8 million during the same quarter last year.

“As anticipated, we experienced an increase in the net interest margin during the first quarter,” said Harold R. Carpenter, Pinnacle’s chief financial officer. “More importantly, our net interest income and our total revenues were at historic highs. Loan yields appear to be stabilizing, and growth in several fee categories contributed to the record first quarter revenues.”

• Noninterest and income tax expense
  • Noninterest expense for the quarter ended March 31, 2014 was $33.7 million, compared to $32.6 million in the fourth quarter of 2013 and $32.4 million in the same quarter last year.
    • Salaries and employee benefits costs were up from the fourth quarter of 2013 by approximately $256,000 and by $2.2 million from the first quarter of 2013.
    • Other real estate expenses were $651,000 in the first quarter of 2014, compared to $302,000 in the fourth quarter of 2013 and $721,000 in the same quarter last year.
  • Income tax expense was $8.1 million for the first quarter of 2014, compared to $7.3 million in the fourth quarter of 2013 and $6.6 million in the same quarter last year.

“Excluding other real estate expenses, our first quarter noninterest expense represents an increase of 2.1 percent over our expense amount for the fourth quarter of last year,” Carpenter said. “As compared to the fourth quarter of 2013, the ratio of expense (excluding ORE expenses) to average assets rose to 2.43 percent in the first quarter due primarily to seasonal salary adjustments and increases in various other expense categories. Increasing the operating leverage of our firm remains a key objective of our leadership.

“We anticipate our expense base in 2014 will increase as we continue to recruit relationship managers and other professionals to our firm. However, we expect to make continued progress toward our target range of expenses to total assets of 2.10 to 2.30 percent in 2014 primarily through achievement of our loan growth targets.”

• Asset Quality
  • Nonperforming assets declined by $2.8 million from Dec. 31, 2013, a linked-quarter reduction of 8.28 percent. Nonperforming assets were 0.73 percent of total loans and ORE at March 31, 2014, compared to 0.80 percent at Dec. 31, 2013 and 1.02 percent at March 31, 2013.
  • Allowance for loan losses represented 1.61 percent of total loans at March 31, 2014, compared to 1.64 percent at Dec. 31, 2013 and 1.84 percent at March 31, 2013. The ratio of the allowance for loan losses to nonperforming loans increased to 432.7 percent at March 31, 2014, from 373.8 percent at Dec. 31, 2013 and 317.9 percent at March 31, 2013.
    • Net charge-offs were $934,000 for the quarter ended March 31, 2014, compared to $1.54 million for the fourth quarter of 2013 and $2.18 million for the quarter ended March 31, 2013. Annualized net charge-offs as a percentage of average loans for the quarter ended March 31, 2014 were 0.09 percent compared to 0.24 percent for the quarter ended March 31, 2013.
    • Provision for loan losses decreased from $2.17 million for the first quarter of 2013 to $488,000 for the first quarter of 2014 and $2.23 million for the fourth quarter of 2013.

WEBCAST AND CONFERENCE CALL INFORMATION

Pinnacle will host a webcast and conference call at 8:30 a.m. (CDT) on April 15, 2014 to discuss first quarter 2014 results and other matters. To access the call for audio only, please call 1-877-602-7944. For the presentation and streaming audio, please access the webcast on the investor relations page of Pinnacle's website at www.pnfp.com.

For those unable to participate in the webcast, it will be archived on the investor relations page of Pinnacle's website at www.pnfp.com for 90 days following the presentation.

Pinnacle Financial Partners provides a full range of banking, investment, trust, mortgage and insurance products and services designed for businesses and their owners and individuals interested in a comprehensive relationship with their financial institution.

The firm began operations in a single downtown Nashville location in October 2000 and has since grown to $5.6 billion in assets at March 31, 2014. At March 31, 2014, Pinnacle is the second-largest bank holding company headquartered in Tennessee, with 29 offices in eight Middle Tennessee counties and four offices in Knoxville. Additionally, Great Place to Work® named Pinnacle one of the best workplaces in the United States on its 2013 Best Small & Medium Workplaces list published in FORTUNE magazine. The American Banker also recognized Pinnacle as the best bank to work for in the country.

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

Certain of the statements in this release may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words "expect," "anticipate," “goal,” “objective,” "intend," "plan," "believe," ”should,” "seek," ”estimate" and similar expressions are intended to identify such forward-looking statements, but other statements not based on historical information may also be considered forward-looking. All forward-looking statements are subject to risks, uncertainties and other factors that may cause the actual results, performance or achievements of Pinnacle Financial to differ materially from any results expressed or implied by such forward-looking statements. Such risks include, without limitation, (i) deterioration in the financial condition of borrowers resulting in significant increases in loan losses and provisions for those losses; (ii) continuation of the historically low short-term interest rate environment; (iii) the inability of Pinnacle Financial to grow its loan portfolio; (iv) changes in loan underwriting, credit review or loss reserve policies associated with economic conditions, examination conclusions, or regulatory developments; (v) effectiveness of Pinnacle Financial’s asset management activities in improving, resolving or liquidating lower-quality assets; (vi) increased competition with other financial institutions; (vii) greater than anticipated adverse conditions in the national or local economies including the Nashville-Davidson-Murfreesboro-Franklin MSA and the Knoxville MSA, particularly in commercial and residential real estate markets; (viii) rapid fluctuations or unanticipated changes in interest rates on loans or deposits; (ix) the results of regulatory examinations; (x) the ability to retain large, uninsured deposits; (xi) the development of any new market other than Nashville or Knoxville; (xii) a merger or acquisition; (xiii) any matter that would cause Pinnacle Financial to conclude that there was impairment of any asset, including intangible assets; (xiv) the ability to attract additional financial advisors or to attract customers from other financial institutions; (xv) further deterioration in the valuation of other real estate owned and increased expenses associated therewith; (xvi) inability to comply with regulatory capital requirements, including those resulting from changes to capital calculation methodologies and required capital maintenance levels; (xvii) risks associated with litigation, including the applicability of insurance coverage; (xviii) approval of the declaration of any dividend by Pinnacle Financial’s board of directors and, (xix) changes in state and federal legislation, regulations or policies applicable to banks and other financial service providers, including regulatory or legislative developments arising out of current unsettled conditions in the economy, including implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act. A more detailed description of these and other risks is contained in Pinnacle Financial's most recent annual report on Form 10-K filed with the Securities and Exchange Commission on February 25, 2014. Many of such factors are beyond Pinnacle Financial's ability to control or predict, and readers are cautioned not to put undue reliance on such forward-looking statements. Pinnacle Financial disclaims any obligation to update or revise any forward-looking statements contained in this release, whether as a result of new information, future events or otherwise.