PNFP Reports Diluted EPS of $1.22, ROAA of 1.52% and ROTCE of 17.60% for 1Q 2019

Excluding gains and losses on investment securities transactions,
diluted EPS of $1.24, ROAA of 1.54% and ROTCE of 17.87% for 1Q 2019

NASHVILLE, Tenn.–(BUSINESS WIRE)–Pinnacle Financial Partners, Inc. (Nasdaq/NGS: PNFP) reported net income
per diluted common share of $1.22 for the quarter ended March 31, 2019,
compared to net income per diluted common share of $1.08 for the quarter
ended March 31, 2018, an increase of 13.0 percent.

Excluding gains and losses on the sale of investment securities in both
2019 and 2018 and merger-related charges in 2018, net income per diluted
common share was $1.24 for the three months ended March 31, 2019,
compared to net income per diluted common share of $1.13 for the three
months ended March 31, 2018, a growth rate of 9.7 percent.

“Our model is simple. First, we hire long-tenured bankers from our
larger, bureaucratic competitors. Then, we support and enable them to
move their clients and capture the balance sheet and fee opportunities
those clients represent. And, ultimately, we capitalize on the operating
leverage associated with hiring successful revenue producers to produce
outsized earnings growth,” said M. Terry Turner, Pinnacle’s president
and chief executive officer. “First quarter 2019 was another validation
that our model works, as we continued to hire a meaningful number of
revenue producers, continued to produce low double-digit loan growth and
translated that into roughly 13 percent growth in fully diluted EPS on a
GAAP basis, or 10 percent growth, after considering the impact of
merger-related charges and gains and losses from investment securities
transactions.

“My great friend, Ron Samuels, who is well known to many of our
shareholders as the former Chairman and CEO of Avenue Bank here in
Nashville, has recently decided that he is ready to retire from his
day-to-day responsibilities as part of the leadership team at Pinnacle
on June 30. We are grateful that he will remain on our board but will
miss his everyday leadership and always optimistic perspective. On
behalf of the entire Pinnacle family, I wish Ron and his wife Lynn all
the best.”

GROWING THE CORE EARNINGS CAPACITY OF THE FIRM:

  • Loans at March 31, 2019 were a record $18.2 billion, an increase of
    $1.8 billion from March 31, 2018, reflecting year-over-year growth of
    11.3 percent. Loans at March 31, 2019 increased $467.4 million from
    Dec. 31, 2018, reflecting a linked-quarter annualized growth rate of
    10.6 percent.

    • Average loans were $17.9 billion for the three months ended March
      31, 2019, up $308.2 million from $17.6 billion for the three
      months ended Dec. 31, 2018, an annualized growth rate of 7.0
      percent.
    • At March 31, 2019, the remaining discount associated with fair
      value accounting adjustments on acquired loans was $85.8 million,
      compared to $95.7 million at Dec. 31, 2018.
  • Deposits at March 31, 2019 were $18.5 billion, an increase of $2.0
    billion from March 31, 2018, reflecting year-over-year growth of 12.0
    percent. Deposits at March 31, 2019 decreased $368.6 million from Dec.
    31, 2018, primarily from more favorable funding strategies.

    • Average deposits were $18.4 billion for the three months ended
      March 31, 2019, consistent with the $18.4 billion for the three
      months ended Dec. 31, 2018.
    • Core deposits were $16.3 billion at March 31, 2019, compared to
      $16.5 billion at Dec. 31, 2018 and $14.8 billion at March 31,
      2018, a year-over-year growth rate of 10.8 percent.
  • Revenues for the quarter ended March 31, 2019 were $238.3 million, a
    decrease of $9.2 million from the $247.5 million recognized in the
    fourth quarter of 2018, and up $19.7 million from the first quarter of
    2018. This represents a year-over-year growth rate of 9.0 percent,
    despite a $5.7 million reduction in the first quarter of 2019 in
    discount accretion associated with fair value adjustments compared to
    the first quarter of 2018.

    • Revenue per fully diluted share was $3.09 for the three months
      ended March 31, 2019, compared to $3.19 for the fourth quarter of
      2018 and $2.83 for the first quarter of 2018.

“We hired 27 high-profile revenue producers in the first three months of
2019, a strong predictor of our continued future growth,” Turner said.
“We believe our recruiting success is creating even more opportunities
for our firm to move meaningful market share from larger, more
vulnerable banks and we expect to attract the best bankers who control
the best clients in our markets. It is the only way I know to reliably
produce outsized growth on a sound basis through a typical credit cycle.

“We expected low double-digit linked-quarter loan growth in the first
quarter of 2019. We operate in 11 of the best banking markets in the
United States and, given that Pinnacle is a relatively new entrant to
seven of those markets, we are very optimistic about our future growth
opportunities.

“Additionally, it now appears that we have successfully leveraged our
distinctive culture and differentiated client experience to produce
meaningful revenue synergies following our merger with BNC Bancorp,”
Turner said. “Many times, merger integrations have the impact of
destroying associate and client engagement, which results in diminished
growth and performance metrics. But at Pinnacle, largely based on how
our associates responded to The Great Place to Work Institute’s survey,
we were recently recognized by FORTUNE magazine as the
second-best place to work in Finance and Insurance, up from No. 7 on the
prestigious list when the BNC merger was announced in early 2017.
Similarly, Greenwich Associates recently recognized us as one of very
few banks in its large research universe that has been able to establish
a truly differentiated brand among businesses — specifically that we are
easy to do business with. This relentless focus on associate engagement
and the client experience has enabled us to produce extraordinary growth
in the Carolinas and Virginia, our newest markets, even while changing
the brand and converting systems. We are pleased to have experienced a
compounded annual growth rate of 11 percent in both loans and deposits
in that footprint since December 31, 2017.”

FOCUSING ON PROFITABILITY:

  • Return on average assets was 1.52 percent for the first quarter of
    2019, compared to 1.54 percent for the fourth quarter of 2018 and 1.53
    percent for the first quarter last year. First quarter 2019 return on
    average tangible assets amounted to 1.64 percent, compared to 1.66
    percent for the fourth quarter of 2018 and 1.67 percent for the first
    quarter of 2018.

    • Excluding gains and losses from investment securities transactions
      and, for 2018, merger-related charges, return on average assets
      was 1.54 percent for the first quarter of 2019, compared to 1.56
      percent for the fourth quarter of 2018 and 1.60 percent for the
      first quarter of 2018. Likewise, excluding gains and losses from
      investment securities transactions and, for 2018, merger-related
      charges, the firm’s return on average tangible assets was 1.67
      percent for the first quarter of 2019, compared to 1.69 percent
      for the fourth quarter of 2018 and 1.74 percent for the first
      quarter of 2018.
  • Return on average common equity for the first quarter of 2019 amounted
    to 9.49 percent, compared to 9.60 percent for the fourth quarter of
    2018 and 9.07 percent for the first quarter of 2018. First quarter
    2019 return on average tangible common equity amounted to 17.60
    percent, compared to 18.14 percent for the fourth quarter of 2018 and
    18.12 percent for the first quarter of 2018.

    • Excluding gains and losses from investment securities transactions
      and, for 2018, merger-related charges, return on average tangible
      common equity amounted to 17.87 percent for the first quarter of
      2019, compared to 18.46 percent for the fourth quarter of 2018 and
      18.98 percent for the first quarter of 2018.

“Our profitability metrics are strong and provide us the ongoing
leverage to hire more revenue producers and further invest in our future
growth,” said Harold R. Carpenter, Pinnacle’s chief financial officer.
“We originally published our model for targeted profitability back in
2012 and have elevated those targets several times since. We are
cognizant that our industry faces many macro challenges. In spite of
these challenges, we continue to target top-quartile profitability and,
more importantly, continue our focus on earnings per share growth and
tangible book value per share accretion, having produced 5-year
compounded annual growth rates of 14.5 percent and 12.5 percent,
respectively, through the first quarter of 2019.”

MAINTAINING A FORTRESS BALANCE SHEET:

  • Net charge-offs were $3.6 million for the quarter ended March 31,
    2019, compared to $5.7 million for the quarter ended Dec. 31, 2018 and
    $4.0 million for the quarter ended March 31, 2018. Annualized net
    charge-offs as a percentage of average loans for the quarter ended
    March 31, 2019 declined to 0.08 percent, compared to 0.11 percent for
    the quarter ended Dec. 31, 2018 and 0.10 percent for the first quarter
    of 2018.
  • Nonperforming assets increased to 0.61 percent of total loans and ORE
    at March 31, 2019, compared to 0.58 percent at both Dec. 31, 2018 and
    March 31, 2018. Nonperforming assets were $111.3 million at March 31,
    2019, compared to $103.2 million at Dec. 31, 2018 and $94.7 million at
    March 31, 2018.
  • The classified asset ratio at March 31, 2019 was 13.0 percent,
    compared to 12.4 percent at Dec. 31, 2018 and 12.6 percent at March
    31, 2018. Classified assets were $306.8 million at March 31, 2019,
    compared to $284.7 million at Dec. 31, 2018 and $258.1 million at
    March 31, 2018.
  • The allowance for loan losses represented 0.48 percent of total loans
    at March 31, 2019, compared to 0.47 percent at Dec. 31, 2018 and 0.43
    percent at March 31, 2018.

    • The ratio of the allowance for loan losses to nonperforming loans
      was 90.7 percent at March 31, 2019, compared to 95.2 percent at
      Dec. 31, 2018 and 100.0 percent at March 31, 2018. At March 31,
      2019, purchase credit impaired loans of $10.6 million, which were
      recorded at fair value upon acquisition, represented 11.0 percent
      of the firm’s nonperforming loans.
    • Provision for loan losses was $7.2 million in the first quarter of
      2019, compared to $9.3 million in the fourth quarter of 2018 and
      $6.9 million in the first quarter of 2018.

“We are extremely pleased with where we are on asset quality,” Carpenter
said. “Net charge-offs, nonperforming assets and classified assets
remain very low. We remain optimistic about the credit prospects for our
firm for the remainder of 2019. Additionally, in terms of credit
concentrations, following the BNC merger many outside observers thought
that our reliance on CRE was too important to our franchise’s growth
goals and could not be reduced without risk to those growth goals. We
are pleased to report that our long-standing competence in C&I lending
has enabled us to achieve our growth targets, while our commercial real
estate to total risk-based capital ratio has gradually decreased to
282.5 percent, and the ratio of construction loans to total risk-based
capital also decreased to 84.1 percent at March 31, 2019.”

GROWING REVENUES

  • Net interest income for the quarter ended March 31, 2019 was $187.2
    million, compared to $190.2 million for the fourth quarter of 2018 and
    $174.5 million for the first quarter of 2018, a year-over-year growth
    rate of 7.3 percent. Net interest margin was 3.62 percent for the
    first quarter of 2019, compared to 3.63 percent for the fourth quarter
    of 2018 and 3.77 percent for the first quarter of 2018.

    • Included in net interest income for the first quarter of 2019 was
      $9.7 million of discount accretion associated with fair value
      adjustments, compared to $13.2 million of discount accretion
      recognized in the fourth quarter of 2018 and $15.4 million in the
      first quarter of 2018.
    • Average earning assets included $92.4 million of fair value
      adjustments related to our acquisitions at March 31, 2019,
      compared to $105.8 million at Dec. 31, 2018 and $157.9 million at
      March 31, 2018.
  • Noninterest income for the quarter ended March 31, 2019 was $51.1
    million, compared to a record $57.3 million for the fourth quarter of
    2018 and $44.2 million for the first quarter of 2018, up 15.6 percent
    over the first quarter of last year.

    • Wealth management revenues, which include investment, trust and
      insurance services, were $11.6 million for the quarter ended March
      31, 2019, compared to $11.5 million for both the fourth quarter of
      2018 and for the first quarter of 2018.
    • Income from the firm’s investment in Bankers Healthcare Group
      (BHG) was $13.3 million for the quarter ended March 31, 2019,
      compared to $17.9 million for the quarter ended Dec. 31, 2018 and
      $9.4 million for the quarter ended March 31, 2018. Income from the
      firm’s investment in BHG grew 42.0 percent for the quarter ended
      March 31, 2019, compared to the quarter ended March 31, 2018.
    • Other noninterest income decreased by $2.5 million between the
      first quarter of 2019 and the fourth quarter of 2018. Contributing
      to this decrease were $608,000 of decreased fees related to the
      firm’s participation in SBA lending programs and $1.3 million less
      of gains on loan swaps sold to the firm’s clients.

    “Adjusting for the impact of purchase accounting, we are successfully
    translating our increasing client counts and balance sheet growth into
    meaningful net interest income and fee income growth,” Carpenter said.
    “Impacting net interest income in the first quarter was a $3.5 million
    reduction in discount accretion from fair value adjustments between
    the fourth and first quarters. Additionally, our linked-quarter net
    interest income also decreased due to a fewer number of business days
    in the first quarter. Absent these matters, we would consider
    linked-quarter net interest income to be quite strong in a very
    difficult and volatile interest rate environment. Noninterest income
    was also strong in the first quarter, up 15.6 percent year-over-year,
    as mortgage revenues improved in the current rate environment, and BHG
    had another phenomenal quarter.”

CREATING OPERATING LEVERAGE

  • Noninterest expense for the quarter ended March 31, 2019 was $114.1
    million, compared to $119.4 million in the fourth quarter of 2018 and
    $108.6 million in the first quarter of 2018, reflecting a
    year-over-year decrease of 5.0 percent.

    • Salaries and employee benefits were $70.4 million in the first
      quarter of 2019, compared to $74.7 million in the fourth quarter
      of 2018 and $63.7 million in the first quarter of 2018, reflecting
      a year-over-year increase of 10.4 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 $6.3 million in the first quarter of
        2019, compared to $13.7 million in the fourth quarter of 2018
        and $5.7 million in the first quarter of last year.
    • The efficiency ratio for the first quarter of 2019 decreased to
      47.86 percent, compared to 48.25 percent for the fourth quarter of
      2018 and 49.7 percent in the first quarter of 2018. The ratio of
      noninterest expenses to average assets decreased to 1.85 percent
      for the first quarter of 2019 from 1.92 percent in the fourth
      quarter of 2018 and 1.98 percent in the first quarter of 2018.

      • Excluding merger-related charges, gains and losses from
        investment securities transactions and other real estate owned
        (ORE) expense in each period, the efficiency ratio was 47.37
        percent for the first quarter of 2019, compared to 47.55
        percent for the fourth quarter of 2018 and 47.58 percent for
        the first quarter of 2018. Excluding ORE expense, the ratio of
        noninterest expense to average assets was 1.84 percent for the
        first quarter of 2019, compared to 1.91 percent for the fourth
        quarter of 2018 and 1.90 percent for the first quarter of 2018.
    • The effective tax rate for the first quarter of 2019 was 19.7
      percent, compared to 19.7 percent for the fourth quarter of 2018
      and 19.0 percent for the first quarter of 2018. The effective tax
      rate for the first quarter of 2019 includes a tax benefit related
      to equity compensation of $769,000, compared to $14,000 in the
      fourth quarter of 2018 and $2.7 million in the first quarter of
      2018, respectively, associated with vesting benefits.
    • During the first quarter of 2019, the firm acquired approximately
      543,600 shares of its common stock in open market transactions
      pursuant to its previously approved share repurchase program, at
      an average price of $55.25.

“We continue to be pleased with the management of our expense base and
our team’s focus on growing revenues without the need to focus entirely
on structural expense reductions as the primary pathway for shareholder
value creation,” Carpenter said. “During the first quarter of 2019, we
paid our associates a target incentive award for 2018, which serves to
create a lot of positive energy around our firm. As to expense run rates
for 2019, other than increasing our incentive accruals should we be able
to achieve our corporate earnings goals, we don’t foresee any unusual
items currently. Obviously, with recent merger announcements from
competitors in our markets, we’d love to capitalize on the opportunity
to ramp up our hiring activity.”

WEBCAST AND CONFERENCE CALL INFORMATION

Pinnacle will host a webcast and conference call at 8:30 a.m. (CDT) on
April 16, 2019 to discuss first quarter 2019 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. Pinnacle
Banks has the No. 1 deposit market share in the
Nashville-Murfreesboro-Franklin MSA, according to June 30, 2018 deposit
data from the FDIC. Pinnacle earned a place on FORTUNE’s 2017,
2018 and 2019 lists of the 100 Best Companies to Work For in the U.S.,
and American Banker recognized Pinnacle as one of America’s Best
Banks to Work For six 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 $25.6 billion in
assets as of March 31, 2019. 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,” “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 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 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
differences in interest rates on loans or deposits from those that
Pinnacle Financial is modeling or anticipating 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 for associates) or otherwise to attract
customers from other financial institutions; (xiv) 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 were to exceed
percentage levels of total capital in guidelines recommended by its
regulators; (xvi) approval of the declaration of any dividend by
Pinnacle Financial’s board of directors; (xvii) 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; (xviii) 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; (xix) 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; (xx) changes in state and federal
legislation, regulations or policies applicable to banks and other
financial service providers, like BHG, including regulatory or
legislative developments; (xxi) risks associated with the possible
shutdown of the United States federal government, including adverse
effects on the national or local economies and adverse effects resulting
from a shutdown of the U.

Contacts

MEDIA CONTACT: Joe Bass, 615-743-8219
FINANCIAL CONTACT: Harold
Carpenter, 615-744-3742
WEBSITE: www.pnfp.com

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