Attached files
file | filename |
---|---|
EX-32.2 - EXHIBIT 32.2 - PINNACLE FINANCIAL PARTNERS INC | ex32_2.htm |
EX-31.1 - EXHIBIT 31.1 - PINNACLE FINANCIAL PARTNERS INC | ex31_1.htm |
EX-32.1 - EXHIBIT 32.1 - PINNACLE FINANCIAL PARTNERS INC | ex32_1.htm |
EX-31.2 - EXHIBIT 31.2 - PINNACLE FINANCIAL PARTNERS INC | ex31_2.htm |
EXCEL - IDEA: XBRL DOCUMENT - PINNACLE FINANCIAL PARTNERS INC | Financial_Report.xls |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(mark one)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2014
or
o TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission File Number: 000-31225
, Inc.
|
(Exact name of registrant as specified in its charter)
|
Tennessee
|
|
62-1812853
|
(State or other jurisdiction of incorporation or organization)
|
|
(I.R.S. Employer Identification No.)
|
150 Third Avenue South, Suite 900, Nashville, Tennessee
|
|
37201
|
(Address of principal executive offices)
|
|
(Zip Code)
|
(615) 744-3700
|
(Registrant's telephone number, including area code)
|
Not Applicable
|
(Former name, former address and former fiscal year, if changes since last report)
|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x
|
No o
|
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for shorter period that the registrant was required to submit and post such files).
Yes x
|
No o
|
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer x
|
Accelerated Filer o
|
|
Non-accelerated Filer o
(do not check if you are a smaller reporting company)
|
Smaller reporting companyo
|
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o
|
No x
|
As of July 31, 2014 there were 35,610,952 shares of common stock, $1.00 par value per share, issued and outstanding.
Pinnacle Financial Partners, Inc.
Report on Form 10-Q
June 30, 2014
TABLE OF CONTENTS
|
Page No.
|
|
|
PART I – Financial Information:
|
|
Item 1. Consolidated Financial Statements (Unaudited)
|
4
|
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
|
38
|
Item 3. Quantitative and Qualitative Disclosures about Market Risk
|
60
|
Item 4. Controls and Procedures
|
60
|
|
|
PART II – Other Information:
|
|
Item 1. Legal Proceedings
|
61
|
Item 1A. Risk Factors
|
61
|
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
|
62
|
Item 3. Defaults Upon Senior Securities
|
63
|
Item 4. Mine Safety Disclosures
|
63
|
Item 5. Other Information
|
63
|
Item 6. Exhibits
|
64
|
Signatures
|
|
2
FORWARD-LOOKING STATEMENTS
Certain of the statements in this quarterly report on Form 10-Q may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words "expect," "anticipate," "goal," "objective," "intend," "plan," "believe," "should," "seek," "estimate" and similar expressions are intended to identify such forward-looking statements, but other statements not based on historical information may also be considered forward-looking. All forward-looking statements are subject to risks, uncertainties and other factors that may cause the actual results, performance or achievements of Pinnacle Financial to differ materially from any results expressed or implied by such forward-looking statements. Such risks include, without limitation, (i) deterioration in the financial condition of borrowers resulting in significant increases in loan losses and provisions for those losses; (ii) continuation of the historically low short-term interest rate environment; (iii) the inability of Pinnacle Financial to grow its loan portfolio; (iv) changes in loan underwriting, credit review or loss reserve policies associated with economic conditions, examination conclusions, or regulatory developments; (v) effectiveness of Pinnacle Financial's asset management activities in improving, resolving or liquidating lower-quality assets; (vi) increased competition with other financial institutions; (vii) greater than anticipated adverse conditions in the national or local economies including the Nashville-Davidson-Murfreesboro-Franklin MSA and the Knoxville MSA, particularly in commercial and residential real estate markets; (viii) rapid fluctuations or unanticipated changes in interest rates on loans or deposits; (ix) the results of regulatory examinations; (x) the ability to retain large, uninsured deposits; (xi) the development of any new market other than Nashville or Knoxville; (xii) a merger or acquisition; (xiii) any matter that would cause Pinnacle Financial to conclude that there was impairment of any asset, including intangible assets; (xiv) reduced ability to attract additional financial advisors (or failure of such advisors to cause their clients to switch to Pinnacle Financial) or otherwise to attract customers from other financial institutions; (xv) further deterioration in the valuation of other real estate owned and increased expenses associated therewith; (xvi) inability to comply with regulatory capital requirements, including those resulting from changes to capital calculation methodologies and required capital maintenance levels; (xvii) risks associated with litigation, including the applicability of insurance coverage; (xviii) approval of the declaration of any dividend by Pinnacle Financial's board of directors; (xix) the vulnerability of our network and online banking portals to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss and other security breaches; (xx) the possibility of increased compliance costs as a result of increased regulatory oversight and the development of additional banking products for our corporate and consumer clients; and (xxi) changes in state and federal legislation, regulations or policies applicable to banks and other financial service providers, including regulatory or legislative developments arising out of current unsettled conditions in the economy, including implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act. A more detailed description of these and other risks is contained in Pinnacle Financial's most recent annual report on Form 10-K filed with the Securities and Exchange Commission on February 25, 2014 and Pinnacle Financial's most recent quarterly report on Form 10-Q filed with the Securities and Exchange Commission on May 2, 2014. Many of such factors are beyond Pinnacle Financial's ability to control or predict, and readers are cautioned not to put undue reliance on such forward-looking statements. Pinnacle Financial disclaims any obligation to update or revise any forward-looking statements contained in this report, whether as a result of new information, future events or otherwise.
3
Item 1. | Part I. Financial Information |
PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
June 30, 2014
|
December 31, 2013
|
||||||
ASSETS
|
||||||||
Cash and noninterest-bearing due from banks
|
$
|
91,575,519
|
$
|
79,785,004
|
||||
Interest-bearing due from banks
|
114,865,408
|
124,509,486
|
||||||
Federal funds sold and other
|
4,667,086
|
4,644,247
|
||||||
Cash and cash equivalents
|
211,108,013
|
208,938,737
|
||||||
|
||||||||
Securities available-for-sale, at fair value
|
743,528,294
|
693,456,314
|
||||||
Securities held-to-maturity (fair value of $38,290,464 and $38,817,467 at
|
||||||||
June 30, 2014 and December 31, 2013, respectively)
|
38,537,545
|
39,795,649
|
||||||
Mortgage loans held-for-sale
|
24,591,553
|
12,850,339
|
||||||
|
||||||||
Loans
|
4,315,561,552
|
4,144,493,486
|
||||||
Less allowance for loan losses
|
(66,888,250
|
)
|
(67,969,693
|
)
|
||||
Loans, net
|
4,248,673,302
|
4,076,523,793
|
||||||
|
||||||||
Premises and equipment, net
|
72,534,086
|
72,649,574
|
||||||
Other investments
|
33,496,695
|
33,226,195
|
||||||
Accrued interest receivable
|
15,921,099
|
15,406,389
|
||||||
Goodwill
|
243,550,227
|
243,651,006
|
||||||
Core deposits and other intangible assets
|
3,365,399
|
3,840,750
|
||||||
Other real estate owned
|
12,946,465
|
15,226,136
|
||||||
Other assets
|
140,538,915
|
148,210,975
|
||||||
Total assets
|
$
|
5,788,791,593
|
$
|
5,563,775,857
|
||||
|
||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
Deposits:
|
||||||||
Noninterest-bearing
|
$
|
1,324,358,420
|
$
|
1,167,414,487
|
||||
Interest-bearing
|
900,576,170
|
884,294,802
|
||||||
Savings and money market accounts
|
1,950,235,361
|
1,962,714,398
|
||||||
Time
|
476,343,393
|
519,049,037
|
||||||
Total deposits
|
4,651,513,344
|
4,533,472,724
|
||||||
Securities sold under agreements to repurchase
|
62,272,670
|
70,465,326
|
||||||
Federal Home Loan Bank advances
|
170,556,327
|
90,637,328
|
||||||
Subordinated debt and other borrowings
|
97,408,292
|
98,658,292
|
||||||
Accrued interest payable
|
661,273
|
792,703
|
||||||
Other liabilities
|
41,997,702
|
46,041,823
|
||||||
Total liabilities
|
5,024,409,608
|
4,840,068,196
|
||||||
Stockholders' equity:
|
||||||||
Preferred stock, no par value, 10,000,000 shares authorized;
|
||||||||
no shares issued and outstanding
|
-
|
-
|
||||||
Common stock, par value $1.00; 90,000,000 shares authorized;
|
||||||||
35,601,495 and 35,221,941 shares issued and outstanding
|
||||||||
at June 30, 2014 and December 31, 2013, respectively
|
35,601,495
|
35,221,941
|
||||||
Additional paid-in capital
|
555,428,349
|
550,212,135
|
||||||
Retained earnings
|
170,155,642
|
142,298,199
|
||||||
Accumulated other comprehensive loss, net of taxes
|
3,196,499
|
(4,024,614
|
)
|
|||||
Total stockholders' equity
|
764,381,985
|
723,707,661
|
||||||
Total liabilities and stockholders' equity
|
$
|
5,788,791,593
|
$
|
5,563,775,857
|
See accompanying notes to consolidated financial statements (unaudited).
4
PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
||||||||||||||
|
2014
|
2013
|
2014
|
2013
|
||||||||||||
Interest income:
|
||||||||||||||||
Loans, including fees
|
$
|
45,089,706
|
$
|
42,149,149
|
$
|
88,785,364
|
$
|
83,663,362
|
||||||||
Securities:
|
||||||||||||||||
Taxable
|
3,628,264
|
3,650,766
|
7,348,543
|
7,321,700
|
||||||||||||
Tax-exempt
|
1,563,612
|
1,483,965
|
3,161,409
|
3,140,373
|
||||||||||||
Federal funds sold and other
|
282,822
|
260,440
|
559,880
|
575,212
|
||||||||||||
Total interest income
|
50,564,404
|
47,544,320
|
99,855,196
|
94,700,647
|
||||||||||||
|
||||||||||||||||
Interest expense:
|
||||||||||||||||
Deposits
|
2,481,762
|
2,955,985
|
5,077,002
|
6,368,381
|
||||||||||||
Securities sold under agreements to repurchase
|
31,329
|
70,823
|
61,844
|
148,639
|
||||||||||||
Federal Home Loan Bank advances and other borrowings
|
824,912
|
918,762
|
1,582,134
|
1,826,403
|
||||||||||||
Total interest expense
|
3,338,003
|
3,945,570
|
6,720,980
|
8,343,423
|
||||||||||||
Net interest income
|
47,226,401
|
43,598,750
|
93,134,216
|
86,357,224
|
||||||||||||
Provision for loan losses
|
254,348
|
2,774,048
|
741,986
|
4,946,452
|
||||||||||||
Net interest income after provision for loan losses
|
46,972,053
|
40,824,702
|
92,392,230
|
81,410,772
|
||||||||||||
|
||||||||||||||||
Noninterest income:
|
||||||||||||||||
Service charges on deposit accounts
|
2,965,644
|
2,540,866
|
5,756,612
|
5,021,110
|
||||||||||||
Investment services
|
2,164,410
|
1,895,398
|
4,292,244
|
3,688,038
|
||||||||||||
Insurance sales commissions
|
1,144,871
|
1,107,696
|
2,529,792
|
2,501,000
|
||||||||||||
Gain on mortgage loans sold, net
|
1,668,604
|
1,948,531
|
2,903,475
|
3,803,942
|
||||||||||||
Loss on sale of investment securities
|
-
|
(25,241
|
)
|
-
|
(25,241
|
)
|
||||||||||
Trust fees
|
1,071,848
|
880,204
|
2,217,599
|
1,824,536
|
||||||||||||
Other noninterest income
|
3,582,067
|
2,978,266
|
7,630,084
|
6,414,691
|
||||||||||||
Total noninterest income
|
12,597,444
|
11,325,720
|
25,329,806
|
23,228,076
|
||||||||||||
|
||||||||||||||||
Noninterest expense:
|
||||||||||||||||
Salaries and employee benefits
|
21,772,469
|
20,570,753
|
43,522,429
|
40,143,109
|
||||||||||||
Equipment and occupancy
|
5,822,662
|
5,204,159
|
11,531,692
|
10,317,209
|
||||||||||||
Other real estate expense
|
226,006
|
1,390,606
|
877,158
|
2,111,568
|
||||||||||||
Marketing and other business development
|
1,064,990
|
987,171
|
1,973,891
|
1,777,842
|
||||||||||||
Postage and supplies
|
544,194
|
517,667
|
1,104,808
|
1,109,155
|
||||||||||||
Amortization of intangibles
|
237,676
|
248,186
|
475,351
|
769,173
|
||||||||||||
Other noninterest expense
|
4,233,931
|
1,943,190
|
8,062,459
|
7,073,683
|
||||||||||||
Total noninterest expense
|
33,901,928
|
30,861,732
|
67,547,788
|
63,301,739
|
||||||||||||
Income before income taxes
|
25,667,569
|
21,288,690
|
50,174,248
|
41,337,109
|
||||||||||||
Income tax expense
|
8,497,589
|
6,978,160
|
16,637,146
|
13,578,452
|
||||||||||||
Net income
|
17,169,980
|
14,310,530
|
33,537,102
|
27,758,657
|
||||||||||||
Per share information:
|
||||||||||||||||
Basic net income per common share
|
$
|
0.49
|
$
|
0.42
|
$
|
0.97
|
$
|
0.81
|
||||||||
Diluted net income per common share
|
$
|
0.49
|
$
|
0.42
|
$
|
0.96
|
$
|
0.81
|
||||||||
Weighted average shares outstanding:
|
||||||||||||||||
Basic
|
34,697,888
|
34,172,274
|
34,650,377
|
34,080,281
|
||||||||||||
Diluted
|
35,081,702
|
34,431,054
|
35,024,859
|
34,319,796
|
See accompanying notes to consolidated financial statements (unaudited).
5
PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
||||||||||||||
|
2014
|
2013
|
2014
|
2013
|
||||||||||||
Net income
|
$
|
17,169,980
|
$
|
14,310,530
|
$
|
33,537,102
|
$
|
27,758,657
|
||||||||
Other comprehensive income (loss), net of tax:
|
||||||||||||||||
Change in fair value on available-for-sale securities, net of tax
|
5,104,719
|
(13,933,693
|
)
|
10,050,631
|
(16,204,604
|
)
|
||||||||||
Change in fair value of cash flow hedges, net of tax
|
(1,535,212
|
)
|
3,347,367
|
(2,829,518
|
)
|
3,347,367
|
||||||||||
Net loss on sale of investment securities reclassified from other comprehensive income into net income, net of tax
|
-
|
15,339
|
-
|
15,339
|
||||||||||||
Total comprehensive income
|
$
|
20,739,487
|
$
|
3,739,543
|
$
|
40,758,215
|
$
|
14,916,759
|
See accompanying notes to consolidated financial statements (unaudited).
6
PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
|
Common Stock
|
Additional Paid-in
Capital
|
Retained Earnings
|
Accumulated Other Comp.
Income (Loss), net
|
Total Stockholders' Equity
|
|||||||||||||
|
Shares
|
Amount
|
||||||||||||||||
|
||||||||||||||||||
Balances, December 31, 2012
|
34,696,597
|
$
|
34,696,597
|
$
|
543,760,439
|
$
|
87,386,689
|
$
|
13,227,634
|
$
|
679,071,359
|
|||||||
Exercise of employee common stock
|
||||||||||||||||||
options and related tax benefits
|
123,239
|
123,239
|
1,282,323
|
-
|
-
|
1,405,562
|
||||||||||||
Issuance of restricted common shares,
|
||||||||||||||||||
net of forfeitures
|
293,441
|
293,441
|
(293,441
|
)
|
-
|
-
|
-
|
|||||||||||
Restricted shares withheld for taxes
|
(39,514
|
)
|
(39,514
|
)
|
(781,156
|
)
|
-
|
-
|
(820,670
|
)
|
||||||||
Compensation expense for restricted shares
|
-
|
-
|
1,983,339
|
-
|
-
|
1,983,339
|
||||||||||||
Compensation expense for stock options
|
-
|
-
|
12,470
|
-
|
-
|
12,470
|
||||||||||||
Net income
|
-
|
-
|
-
|
27,758,657
|
-
|
27,758,657
|
||||||||||||
Other comprehensive loss
|
-
|
-
|
-
|
-
|
(12,841,898
|
)
|
(12,841,898
|
)
|
||||||||||
Balances, June 30, 2013
|
35,073,763
|
$
|
35,073,763
|
$
|
545,963,974
|
$
|
115,145,346
|
$
|
385,736
|
$
|
696,568,819
|
|||||||
|
||||||||||||||||||
Balances, December 31, 2013
|
35,221,941
|
$
|
35,221,941
|
$
|
550,212,135
|
$
|
142,298,199
|
$
|
(4,024,614
|
)
|
$
|
723,707,661
|
||||||
Exercise of employee common stock
|
||||||||||||||||||
options and related tax benefits
|
175,442
|
175,442
|
4,664,969
|
-
|
-
|
4,840,411
|
||||||||||||
Common stock dividends paid
|
-
|
-
|
-
|
(5,679,659
|
)
|
(5,679,659
|
)
|
|||||||||||
Issuance of restricted common shares,
|
||||||||||||||||||
net of forfeitures
|
259,197
|
259,197
|
(259,197
|
)
|
-
|
-
|
-
|
|||||||||||
Restricted shares withheld for taxes
|
(55,085
|
)
|
(55,085
|
)
|
(1,771,041
|
)
|
-
|
-
|
(1,826,126
|
)
|
||||||||
Compensation expense for restricted shares
|
-
|
-
|
2,581,483
|
-
|
-
|
2,581,483
|
||||||||||||
Net income
|
-
|
-
|
-
|
33,537,102
|
-
|
33,537,102
|
||||||||||||
Other comprehensive income
|
-
|
-
|
-
|
-
|
7,221,113
|
7,221,113
|
||||||||||||
Balances, June 30, 2014
|
35,601,495
|
$
|
35,601,495
|
$
|
555,428,349
|
$
|
170,155,642
|
$
|
3,196,499
|
$
|
764,381,985
|
See accompanying notes to consolidated financial statements (unaudited).
7
PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
Six Months Ended
June 30,
|
|||||||
|
2014
|
2013
|
||||||
Operating activities:
|
||||||||
Net income
|
$
|
33,537,102
|
$
|
27,758,657
|
||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Net amortization/accretion of premium/discount on securities
|
2,154,065
|
2,373,927
|
||||||
Depreciation and amortization
|
4,598,989
|
4,622,942
|
||||||
Provision for loan losses
|
741,986
|
4,946,452
|
||||||
Gain on mortgage loans sold, net
|
(2,903,475
|
)
|
(3,803,942
|
)
|
||||
Loss on sale of investment securities
|
-
|
25,241
|
||||||
Stock-based compensation expense
|
2,581,483
|
1,995,809
|
||||||
Deferred tax benefit (expense)
|
(136,855
|
)
|
67,794
|
|||||
Losses on dispositions of other real estate and other investments
|
141,913
|
1,877,964
|
||||||
Excess tax benefit from stock compensation
|
(1,166,463
|
)
|
(140,181
|
)
|
||||
Mortgage loans held for sale:
|
||||||||
Loans originated
|
(153,548,739
|
)
|
(226,714,093
|
)
|
||||
Loans sold
|
144,711,000
|
243,750,000
|
||||||
(Decrease) increase in other assets
|
(1,504,523
|
)
|
10,576,616
|
|||||
Decrease in other liabilities
|
(4,207,922
|
)
|
(12,608,365
|
)
|
||||
Net cash provided by operating activities
|
24,998,561
|
54,728,821
|
||||||
|
||||||||
Investing activities:
|
||||||||
Activities in securities available-for-sale:
|
||||||||
Purchases
|
(96,556,556
|
)
|
(128,922,089
|
)
|
||||
Sales
|
1,273,528
|
1,213,584
|
||||||
Maturities, prepayments and calls
|
59,975,601
|
77,932,668
|
||||||
Activities in securities held-to-maturity:
|
||||||||
Purchases
|
-
|
(2,045,030
|
)
|
|||||
Maturities, prepayments and calls
|
864,028
|
2,325,000
|
||||||
Increase in loans, net
|
(171,994,156
|
)
|
(221,126,597
|
)
|
||||
Purchases of software, premises and equipment
|
(3,265,513
|
)
|
(3,388,292
|
)
|
||||
Purchase of bank owned life insurance
|
-
|
(30,000,000
|
)
|
|||||
Increase in other investments
|
(178,118
|
)
|
(3,325,587
|
)
|
||||
Net cash used in investing activities
|
(209,881,186
|
)
|
(307,336,343
|
)
|
||||
|
||||||||
Financing activities:
|
||||||||
Net increase in deposits
|
118,040,619
|
81,390,021
|
||||||
Net (decrease) increase in securities sold under agreements to repurchase
|
(8,192,656
|
)
|
2,678,252
|
|||||
Advances from Federal Home Loan Bank:
|
||||||||
Issuances
|
410,000,000
|
324,038,282
|
||||||
Payments/maturities
|
(330,047,151
|
)
|
(74,091,731
|
)
|
||||
Decrease in other borrowings
|
(1,250,000
|
)
|
(6,250,000
|
)
|
||||
Exercise of common stock options and stock appreciation rights,
|
||||||||
net of repurchase of restricted shares
|
3,014,285
|
584,892
|
||||||
Excess tax benefit from stock compensation
|
1,166,463
|
140,181
|
||||||
Common stock dividends paid
|
(5,679,659
|
)
|
-
|
|||||
Net cash provided by financing activities
|
187,051,901
|
328,489,897
|
||||||
Net decrease in cash and cash equivalents
|
2,169,276
|
75,882,375
|
||||||
Cash and cash equivalents, beginning of period
|
208,938,737
|
165,288,669
|
||||||
Cash and cash equivalents, end of period
|
$
|
211,108,013
|
$
|
241,171,044
|
See accompanying notes to consolidated financial statements (unaudited).
8
PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Summary of Significant Accounting Policies
Nature of Business — Pinnacle Financial Partners, Inc. (Pinnacle Financial) is a bank holding company whose primary business is conducted by its wholly-owned subsidiary, Pinnacle Bank. Pinnacle Bank is a commercial bank headquartered in Nashville, Tennessee. Pinnacle Bank provides a full range of banking services in its primary market areas of the Nashville-Davidson-Murfreesboro-Franklin, Tennessee and Knoxville, Tennessee Metropolitan Statistical Areas.
Basis of Presentation — The accompanying unaudited consolidated financial statements have been prepared in accordance with instructions to Form 10-Q and therefore do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, and cash flows in conformity with U.S. generally accepted accounting principles (U.S. GAAP). All adjustments consisting of normally recurring accruals that, in the opinion of management, are necessary for a fair presentation of the financial position and results of operations for the periods covered by the report have been included. The accompanying unaudited consolidated financial statements should be read in conjunction with the Pinnacle Financial consolidated financial statements and related notes appearing in the 2013 Annual Report previously filed on Form 10-K.
These consolidated financial statements include the accounts of Pinnacle Financial and its wholly-owned subsidiaries. PNFP Statutory Trust I, PNFP Statutory Trust II, PNFP Statutory Trust III and PNFP Statutory Trust IV are affiliates of Pinnacle Financial and are included in these consolidated financial statements pursuant to the equity method of accounting. Significant intercompany transactions and accounts are eliminated in consolidation.
Use of Estimates — The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the balance sheet date and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term include the determination of the allowance for loan losses, any potential impairment of intangible assets, including goodwill and the valuation of deferred tax assets, other real estate owned, and our investment portfolio, including other-than-temporary impairment. These financial statements should be read in conjunction with Pinnacle Financial's Annual Report on Form 10-K for the year ended December 31, 2013. There have been no significant changes to Pinnacle Financial's significant accounting policies as disclosed in Pinnacle Financial's Annual Report on Form 10-K for the year ended December 31, 2013.
Recently Adopted Accounting Pronouncements — In February 2013, the FASB issued Accounting Standards Update 2013-02, "Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income" which provides disclosure guidance on amounts reclassified out of AOCI by component. The adoption did not have any impact on our financial position or results of operations but has impacted our financial statement disclosure. As shown on the statement of comprehensive income for the three and six months ended June 30, 2014, Pinnacle Financial did not reclassify any net losses out of other comprehensive income into loss on the sale of investment securities, net of tax, compared to reclassifications of net losses for the three and six months ended June 30, 2013, of approximately $15,000, net of tax.
9
Cash Flow Information — Supplemental cash flow information addressing certain cash and noncash transactions for each of the six months ended June 30, 2014 and 2013 was as follows:
|
For the six months ended June 30,
|
|||||||
|
2014
|
2013
|
||||||
Cash Transactions:
|
||||||||
Interest paid
|
$
|
6,886,261
|
$
|
8,701,479
|
||||
Income taxes paid, net
|
14,100,000
|
15,600,009
|
||||||
Noncash Transactions:
|
||||||||
Loans charged-off to the allowance for loan losses
|
3,268,626
|
11,377,491
|
||||||
Loans foreclosed upon and transferred to other real estate owned
|
1,672,459
|
1,780,131
|
||||||
Available-for-sale securities transferred to held-to-maturity portfolio
|
-
|
39,959,647
|
Income Per Common Share — Basic net income per common share (EPS) is computed by dividing net income by the weighted average common shares outstanding for the period. Diluted EPS reflects the dilution that could occur if securities or other contracts to issue common stock were exercised or converted. The difference between basic and diluted weighted average shares outstanding is attributable to common stock options, common stock appreciation rights, restricted share awards, and restricted share unit awards. The dilutive effect of outstanding options, common stock appreciation rights, restricted share awards, and restricted share unit awards is reflected in diluted EPS by application of the treasury stock method.
The following is a summary of the basic and diluted net income per share calculations for the three and six months ended June 30, 2014 and 2013:
|
For the three months ended
June 30,
|
For the six months ended
June 30,
|
||||||||||||||
|
2014
|
2013
|
2014
|
2013
|
||||||||||||
Basic net income per share calculation:
|
||||||||||||||||
Numerator - Net income
|
$
|
17,169,980
|
$
|
14,310,530
|
$
|
33,537,102
|
$
|
27,758,657
|
||||||||
|
||||||||||||||||
Denominator - Average common shares outstanding
|
34,697,888
|
34,172,274
|
34,650,377
|
34,080,281
|
||||||||||||
Basic net income per share
|
$
|
0.49
|
$
|
0.42
|
$
|
0.97
|
$
|
0.81
|
||||||||
|
||||||||||||||||
Diluted net income per share calculation:
|
||||||||||||||||
Numerator – Net income
|
$
|
17,169,980
|
$
|
14,310,530
|
$
|
33,537,102
|
$
|
27,758,657
|
||||||||
|
||||||||||||||||
Denominator - Average common shares outstanding
|
34,697,888
|
34,172,274
|
34,650,377
|
34,080,281
|
||||||||||||
Dilutive shares contingently issuable
|
383,814
|
258,780
|
374,482
|
239,515
|
||||||||||||
Average diluted common shares outstanding
|
35,081,702
|
34,431,054
|
35,024,859
|
34,319,796
|
||||||||||||
Diluted net income per share
|
$
|
0.49
|
$
|
0.42
|
$
|
0.96
|
$
|
0.81
|
10
Note 2. Securities
The amortized cost and fair value of securities available-for-sale and held-to-maturity at June 30, 2014 and December 31, 2013 are summarized as follows (in thousands):
|
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair
Value
|
||||||||||||
June 30, 2014:
|
||||||||||||||||
Securities available-for-sale:
|
||||||||||||||||
U.S. Treasury securities
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||
U.S. government agency securities
|
117,053
|
19
|
6,148
|
110,924
|
||||||||||||
Mortgage-backed agency securities
|
452,580
|
11,608
|
4,250
|
459,938
|
||||||||||||
State and municipal securities
|
138,382
|
8,066
|
328
|
146,120
|
||||||||||||
Asset-backed securities
|
15,380
|
-
|
150
|
15,230
|
||||||||||||
Corporate notes and other
|
10,207
|
1,109
|
-
|
11,316
|
||||||||||||
|
$
|
733,602
|
$
|
20,802
|
$
|
10,876
|
$
|
743,528
|
||||||||
Securities held-to-maturity:
|
||||||||||||||||
State and municipal securities
|
$
|
38,538
|
$
|
120
|
$
|
368
|
$
|
38,290
|
||||||||
|
$
|
38,538
|
$
|
120
|
$
|
368
|
$
|
38,290
|
||||||||
|
||||||||||||||||
December 31, 2013:
|
||||||||||||||||
Securities available-for-sale:
|
||||||||||||||||
U.S. Treasury securities
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||
U.S. government agency securities
|
117,282
|
13
|
13,422
|
103,873
|
||||||||||||
Mortgage-backed agency securities
|
411,967
|
9,771
|
8,802
|
412,936
|
||||||||||||
State and municipal securities
|
143,763
|
5,504
|
856
|
148,411
|
||||||||||||
Asset-backed securities
|
17,262
|
-
|
255
|
17,007
|
||||||||||||
Corporate notes and other
|
10,218
|
1,018
|
7
|
11,229
|
||||||||||||
|
$
|
700,492
|
$
|
16,306
|
23,342
|
$
|
693,456
|
|||||||||
Securities held-to-maturity:
|
||||||||||||||||
State and municipal securities
|
$
|
39,796
|
$
|
72
|
$
|
1,051
|
$
|
38,817
|
||||||||
|
$
|
39,796
|
$
|
72
|
$
|
1,051
|
$
|
38,817
|
At June 30, 2014, approximately $619.1 million of securities within Pinnacle Financial's investment portfolio were either pledged to secure public funds and other deposits or securities sold under agreements to repurchase.
The amortized cost and fair value of debt securities as of June 30, 2014 by contractual maturity are shown below. Actual maturities may differ from contractual maturities of mortgage- and asset-backed securities since the mortgages and assets underlying the securities may be called or prepaid with or without penalty. Therefore, these securities are not included in the maturity categories in the following summary (in thousands):
|
Available-for-sale
|
Held-to-maturity
|
||||||||||||||
June 30, 2014:
|
Amortized
Cost
|
Fair
Value
|
Amortized Cost
|
Fair
Value
|
||||||||||||
Due in one year or less
|
$
|
4,124
|
$
|
4,161
|
$
|
658
|
$
|
660
|
||||||||
Due in one year to five years
|
33,208
|
34,896
|
8,184
|
8,107
|
||||||||||||
Due in five years to ten years
|
125,395
|
128,613
|
12,578
|
12,632
|
||||||||||||
Due after ten years
|
102,915
|
100,690
|
17,118
|
16,891
|
||||||||||||
Mortgage-backed agency securities
|
452,580
|
459,938
|
-
|
-
|
||||||||||||
Asset-backed securities
|
15,380
|
15,230
|
-
|
-
|
||||||||||||
|
$
|
733,602
|
$
|
743,528
|
$
|
38,538
|
$
|
38,290
|
11
At June 30, 2014 and December 31, 2013, the following investments had unrealized losses. The table below classifies these investments according to the term of the unrealized losses of less than twelve months or twelve months or longer (in thousands):
|
Investments with an Unrealized Loss of
less than 12 months
|
Investments with an
Unrealized Loss of
12 months or longer
|
Total Investments
with an
Unrealized Loss
|
|||||||||||||||||||||
|
Fair Value
|
Unrealized Losses
|
Fair Value
|
Unrealized Losses
|
Fair Value
|
Unrealized
Losses
|
||||||||||||||||||
At June 30, 2014:
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||
U.S. Treasury securities
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||||||
U.S. government agency securities
|
903
|
2
|
101,152
|
6,146
|
102,055
|
6,148
|
||||||||||||||||||
Mortgage-backed agency securities
|
69,147
|
515
|
109,845
|
3,735
|
178,992
|
4,250
|
||||||||||||||||||
State and municipal securities
|
3,098
|
13
|
31,228
|
683
|
34,326
|
696
|
||||||||||||||||||
Asset-backed securities
|
-
|
-
|
15,230
|
150
|
15,230
|
150
|
||||||||||||||||||
Corporate notes
|
500
|
-
|
157
|
-
|
657
|
-
|
||||||||||||||||||
Total temporarily-impaired securities
|
$
|
73,648
|
$
|
530
|
$
|
257,612
|
$
|
10,714
|
$
|
331,260
|
$
|
11,244
|
||||||||||||
|
||||||||||||||||||||||||
At December 31, 2013:
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||
U.S. Treasury securities
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||||||
U.S. government agency securities
|
8,742
|
22
|
92,869
|
13,400
|
101,611
|
13,422
|
||||||||||||||||||
Mortgage-backed agency securities
|
157,262
|
3,913
|
42,903
|
4,889
|
200,165
|
8,802
|
||||||||||||||||||
State and municipal securities
|
46,282
|
1,351
|
3,798
|
555
|
50,080
|
1,906
|
||||||||||||||||||
Asset-backed securities
|
-
|
-
|
17,006
|
255
|
17,006
|
255
|
||||||||||||||||||
Corporate notes
|
946
|
6
|
159
|
2
|
1,105
|
8
|
||||||||||||||||||
Total temporarily-impaired securities
|
$
|
213,232
|
$
|
5,292
|
$
|
156,735
|
$
|
19,101
|
$
|
369,967
|
$
|
24,393
|
The applicable dates for determining when securities are in an unrealized loss position are June 30, 2014 and December 31, 2013. As such, it is possible that a security had a market value that exceeded its amortized cost on other days during the past twelve-month periods ended June 30, 2014 and December 31, 2013, but is in the "Investments with an Unrealized Loss of less than 12 months" category above.
As shown in the tables above, at June 30, 2014, Pinnacle Financial had approximately $11.2 million in unrealized losses on $331.3 million of securities. The unrealized losses associated with these investment securities are driven by changes in interest rates and the unrealized loss is recorded as a component of equity. These securities will continue to be monitored as a part of our ongoing impairment analysis, but are expected to perform even if the rating agencies reduce the credit rating of the bond issuers. Management evaluates the financial performance of the issuers on a quarterly basis to determine if it is probable that the issuers can make all contractual principal and interest payments. If a shortfall in future cash flows is identified, a credit loss will be deemed to have occurred and will be recognized as a charge to earnings and a new cost basis for the security will be established.
Because Pinnacle Financial currently does not intend to sell those securities that have an unrealized loss at June 30, 2014, and it is not more-likely-than-not that Pinnacle Financial will be required to sell the securities before recovery of their amortized cost bases, which may be maturity, Pinnacle Financial does not consider these securities to be other-than-temporarily impaired at June 30, 2014.
12
Periodically, available-for-sale securities may be sold or the composition of the portfolio realigned to improve yields, quality or marketability, or to implement changes in investment or asset/liability strategy, including maintaining collateral requirements and raising funds for liquidity purposes. Additionally, if an available-for-sale security loses its investment grade or tax-exempt status, the underlying credit support is terminated or collection otherwise becomes uncertain based on factors known to management, Pinnacle Financial will consider selling the security, but will review each security on a case-by-case basis as these factors become known.
The carrying values of Pinnacle Financial's investment securities could decline in the future if the financial condition of issuers deteriorates and management determines it is probable that Pinnacle Financial will not recover the entire amortized cost bases of the securities. As a result, there is a risk that other-than-temporary impairment charges may occur in the future. There is also a risk that other-than-temporary impairment charges may occur in the future if management's intention to hold these securities to maturity and/or recovery changes.
Note 3. Loans and Allowance for Loan Losses
For financial reporting purposes, Pinnacle Financial classifies its loan portfolio based on the underlying collateral utilized to secure each loan. This classification is consistent with those utilized in the Quarterly Report of Condition and Income filed with the Federal Deposit Insurance Corporation (FDIC).
Commercial loans receive risk ratings by the assigned financial advisor subject to validation by Pinnacle Financial's independent loan review department. Risk ratings are categorized as pass, special mention, substandard, substandard-nonaccrual or doubtful-nonaccrual. Pinnacle Financial believes that its categories follow those used by Pinnacle Bank's primary regulators. At June 30, 2014, approximately 75% of our loan portfolio was analyzed as a commercial loan type with a specifically assigned risk rating in the allowance for loan loss assessment. Consumer loans and small business loans are generally not assigned an individual risk rating but are evaluated as either accrual or nonaccrual based on the performance of the individual loans. However, certain consumer real estate-mortgage loans and certain consumer and other loans receive a specific risk rating due to the loan proceeds being used for commercial purposes even though the collateral may be of a consumer loan nature.
Risk ratings are subject to continual review by the loan officer. At least annually, our credit procedures require that every risk rated loan of $500,000 or more be subject to a formal credit risk review process. Each loan's risk rating is also subject to review by our independent loan review department, which reviews a substantial portion of our risk rated portfolio annually. Included in the coverage are independent loan reviews of loans in targeted higher-risk portfolio segments.
The following table presents our loan balances by primary loan classification and the amount within each risk rating category. Pass rated loans include all credits other than those included in special mention, substandard, substandard-nonaccrual and doubtful-nonaccrual which are defined as follows:
|
Special mention loans have potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in Pinnacle Financial's credit position at some future date.
|
|
Substandard loans are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize collection of the debt. Substandard loans are characterized by the distinct possibility that Pinnacle Financial will sustain some loss if the deficiencies are not corrected.
|
|
Substandard-nonaccrual loans are substandard loans that have been placed on nonaccrual status.
|
|
Doubtful-nonaccrual loans have all the characteristics of substandard-nonaccrual loans with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.
|
13
The following table outlines the amount of each loan classification categorized into each risk rating category as of June 30, 2014 and December 31, 2013 (in thousands):
|
Commercial real estate - mortgage
|
Consumer real estate - mortgage
|
Construction and land development
|
Commercial and industrial
|
Consumer
and other
|
Total
|
||||||||||||
June 30, 2014
|
||||||||||||||||||
Accruing loans
|
||||||||||||||||||
Pass
|
$
|
1,417,022
|
$
|
672,747
|
$
|
253,501
|
$
|
1,634,704
|
$
|
168,287
|
$
|
4,146,261
|
||||||
Special Mention
|
16,291
|
2,667
|
26,739
|
23,163
|
146
|
69,006
|
||||||||||||
Substandard (1)
|
17,268
|
12,932
|
11,550
|
35,162
|
154
|
77,066
|
||||||||||||
Total
|
1,450,581
|
688,346
|
291,790
|
1,693,029
|
168,587
|
4,292,333
|
||||||||||||
Impaired loans
|
||||||||||||||||||
Nonaccrual loans
|
||||||||||||||||||
Substandard-nonaccrual
|
6,754
|
6,239
|
978
|
1,387
|
320
|
15,678
|
||||||||||||
Doubtful-nonaccrual
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||
Total nonaccrual loans
|
6,754
|
6,239
|
978
|
1,387
|
320
|
15,678
|
||||||||||||
Troubled debt restructurings(2)
|
||||||||||||||||||
Pass
|
-
|
66
|
107
|
263
|
83
|
519
|
||||||||||||
Special Mention
|
-
|
820
|
-
|
-
|
200
|
1,020
|
||||||||||||
Substandard
|
-
|
3,057
|
-
|
2,955
|
-
|
6,012
|
||||||||||||
Total troubled debt restructurings
|
-
|
3,943
|
107
|
3,218
|
283
|
7,551
|
||||||||||||
Total impaired loans
|
6,754
|
10,182
|
1,085
|
4,605
|
603
|
23,229
|
||||||||||||
Total loans
|
$
|
1,457,335
|
$
|
698,528
|
$
|
292,875
|
$
|
1,697,634
|
$
|
169,190
|
$
|
4,315,562
|
(1)
|
Potential problem loans represent those loans with a well-defined weakness and where information about possible credit problems of borrowers has caused management to have doubts about the borrower's ability to comply with present repayment terms. This definition is believed to be substantially consistent with the standards established by Pinnacle Bank's primary regulators for loans classified as substandard, excluding the impact of nonaccrual loans and troubled debt restructurings. Potential problem loans, which are not included in nonaccrual loans, amounted to approximately $77.1 million at June 30, 2014, compared to $65.0 million at December 31, 2013.
|
(2)
|
Troubled debt restructurings are presented as an impaired loan; however, they continue to accrue interest at contractual rates.
|
14
|
Commercial real estate - mortgage
|
Consumer real estate - mortgage
|
Construction and land development
|
Commercial and industrial
|
Consumer
and other
|
Total
|
||||||||||||||||||
December 31, 2013
|
||||||||||||||||||||||||
Accruing loans
|
||||||||||||||||||||||||
Pass
|
$
|
1,332,387
|
$
|
670,412
|
$
|
275,876
|
$
|
1,557,923
|
$
|
143,032
|
$
|
3,979,630
|
||||||||||||
Special Mention
|
8,282
|
1,824
|
31,835
|
20,065
|
-
|
62,006
|
||||||||||||||||||
Substandard (1)
|
20,296
|
14,107
|
7,297
|
23,174
|
154
|
65,028
|
||||||||||||||||||
Total
|
1,360,965
|
686,343
|
315,008
|
1,601,162
|
143,186
|
4,106,664
|
||||||||||||||||||
Impaired loans
|
||||||||||||||||||||||||
Nonaccrual loans
|
||||||||||||||||||||||||
Substandard-nonaccrual
|
9,017
|
5,289
|
1,070
|
2,565
|
242
|
18,183
|
||||||||||||||||||
Doubtful-nonaccrual
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||
Total nonaccrual loans
|
9,017
|
5,289
|
1,070
|
2,565
|
242
|
18,183
|
||||||||||||||||||
Troubled debt restructurings(2)
|
||||||||||||||||||||||||
Pass
|
2,564
|
1,666
|
113
|
320
|
276
|
4,939
|
||||||||||||||||||
Special Mention
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||
Substandard
|
10,889
|
2,318
|
-
|
1,500
|
-
|
14,707
|
||||||||||||||||||
Total troubled debt restructurings
|
13,453
|
3,984
|
113
|
1,820
|
276
|
19,646
|
||||||||||||||||||
Total impaired loans
|
22,470
|
9,273
|
1,183
|
4,385
|
518
|
37,829
|
||||||||||||||||||
Total loans
|
$
|
1,383,435
|
$
|
695,616
|
$
|
316,191
|
$
|
1,605,547
|
$
|
143,704
|
$
|
4,144,493
|
(1)
|
Potential problem loans represent those loans with a well-defined weakness and where information about possible credit problems of borrowers has caused management to have doubts about the borrower's ability to comply with present repayment terms. This definition is believed to be substantially consistent with the standards established by Pinnacle Bank's primary regulators for loans classified as substandard, excluding the impact of nonaccrual loans and troubled debt restructurings. Potential problem loans, which are not included in nonaccrual loans, amounted to approximately $77.1 million at June 30, 2014, compared to $65.0 million at December 31, 2013.
|
(2)
|
Troubled debt restructurings are presented as an impaired loan; however, they continue to accrue interest at contractual rates.
|
At June 30, 2014 and December 31, 2013, all loans classified as nonaccrual were deemed to be impaired. The principal balances of these nonaccrual loans amounted to $15.7 million and $18.2 million at June 30, 2014 and December 31, 2013, respectively, and are included in the tables above. For the six months ended June 30, 2014, the average balance of nonaccrual loans was $16.1 million as compared to $21.5 million for the twelve months ended December 31, 2013. At the date such loans were placed on nonaccrual status, Pinnacle Financial reversed all previously accrued interest income against current year earnings. Had these nonaccrual loans been on accruing status, interest income would have been higher by $416,000 for the six months ended June 30, 2014 and by $573,000 for the six months ended June 30, 2013.
15
The following table details the recorded investment, unpaid principal balance and related allowance and average recorded investment of our nonaccrual loans at June 30, 2014 and December 31, 2013 by loan classification and the amount of interest income recognized on a cash basis throughout the fiscal year-to-date period then ended, respectively, on these loans that remain on the balance sheets (in thousands):
|
At June 30, 2014
|
For the six months ended
June 30, 2014
|
||||||||||||||||||
|
Recorded investment
|
Unpaid principal balance
|
Related allowance(1)
|
Average recorded investment
|
Interest income recognized
|
|||||||||||||||
Collateral dependent nonaccrual loans:
|
||||||||||||||||||||
Commercial real estate – mortgage
|
$
|
4,814
|
$
|
5,407
|
$
|
-
|
$
|
4,913
|
$
|
-
|
||||||||||
Consumer real estate – mortgage
|
2,336
|
2,416
|
-
|
2,366
|
-
|
|||||||||||||||
Construction and land development
|
545
|
545
|
-
|
545
|
-
|
|||||||||||||||
Commercial and industrial
|
1,018
|
1,161
|
-
|
1,053
|
-
|
|||||||||||||||
Consumer and other
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Total
|
$
|
8,713
|
$
|
9,529
|
$
|
-
|
$
|
8,877
|
$
|
-
|
||||||||||
|
||||||||||||||||||||
Cash flow dependent nonaccrual loans:
|
||||||||||||||||||||
Commercial real estate – mortgage
|
$
|
1,940
|
$
|
2,145
|
$
|
190
|
$
|
1,967
|
$
|
-
|
||||||||||
Consumer real estate – mortgage
|
3,903
|
4,185
|
1,089
|
4,045
|
-
|
|||||||||||||||
Construction and land development
|
433
|
512
|
16
|
443
|
-
|
|||||||||||||||
Commercial and industrial
|
369
|
375
|
145
|
469
|
-
|
|||||||||||||||
Consumer and other
|
320
|
338
|
126
|
333
|
-
|
|||||||||||||||
Total
|
$
|
6,965
|
$
|
7,555
|
$
|
1,566
|
$
|
7,257
|
$
|
-
|
||||||||||
Total nonaccrual loans
|
$
|
15,678
|
$
|
17,084
|
$
|
1,566
|
$
|
16,134
|
$
|
-
|
16
|
At December 31, 2013:
|
For the year ended
December 31, 2013
|
||||||||||||||||||
|
Recorded investment
|
Unpaid principal balance
|
Related allowance(1)
|
Average recorded investment
|
Interest income recognized
|
|||||||||||||||
Collateral dependent nonaccrual loans:
|
||||||||||||||||||||
Commercial real estate – mortgage
|
$
|
7,035
|
$
|
7,481
|
$
|
-
|
$
|
6,522
|
$
|
-
|
||||||||||
Consumer real estate – mortgage
|
2,162
|
2,209
|
-
|
2,234
|
-
|
|||||||||||||||
Construction and land development
|
545
|
545
|
-
|
938
|
-
|
|||||||||||||||
Commercial and industrial
|
1,828
|
1,901
|
-
|
3,911
|
-
|
|||||||||||||||
Consumer and other
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Total
|
$
|
11,570
|
$
|
12,136
|
$
|
-
|
$
|
13,605
|
$
|
-
|
||||||||||
|
||||||||||||||||||||
Cash flow dependent nonaccrual loans:
|
||||||||||||||||||||
Commercial real estate – mortgage
|
$
|
1,982
|
$
|
2,166
|
$
|
142
|
$
|
2,448
|
$
|
-
|
||||||||||
Consumer real estate – mortgage
|
3,127
|
3,334
|
722
|
3,405
|
-
|
|||||||||||||||
Construction and land development
|
525
|
609
|
33
|
568
|
-
|
|||||||||||||||
Commercial and industrial
|
737
|
1,029
|
218
|
1,216
|
-
|
|||||||||||||||
Consumer and other
|
242
|
252
|
72
|
242
|
-
|
|||||||||||||||
Total
|
$
|
6,613
|
$
|
7,390
|
$
|
1,187
|
$
|
7,879
|
$
|
-
|
||||||||||
Total nonaccrual loans
|
$
|
18,183
|
$
|
19,526
|
$
|
1,187
|
$
|
21,484
|
$
|
-
|
(1)
|
Collateral dependent loans are typically charged-off to their net realizable value pursuant to requirements of our primary regulators and no specific allowance is carried related to those loans.
|
Pinnacle Financial's policy is that once a loan is placed on nonaccrual status each subsequent payment is reviewed on a case-by-case basis to determine if the payment should be applied to interest or principal pursuant to regulatory guidelines. Pinnacle Financial recognized no interest income from cash payments received on nonaccrual loans during the three and six months ended June 30, 2014 or during the year ended December 31, 2013.
Impaired loans also include loans that Pinnacle Bank has elected to formally restructure due to the weakening credit status of a borrower. The restructuring may facilitate a repayment plan that seeks to minimize the potential losses that Pinnacle Bank may otherwise incur. If on nonaccrual status as of the date of restructuring, the loans are included in nonaccrual loans. Loans that have been restructured that were performing as of the restructure date and continue to perform in accordance with the restructured terms are reported separately as troubled debt restructurings.
At June 30, 2014 and December 31, 2013, there were $7.6 million and $19.6 million, respectively, of troubled debt restructurings that were performing as of their restructure date and which were accruing interest. These troubled debt restructurings are considered impaired loans pursuant to U.S. GAAP. Troubled commercial loans are restructured by specialists within our Special Assets Group, and all restructurings are approved by committees and credit officers separate and apart from the normal loan approval process. These specialists are charged with reducing Pinnacle Financial's overall risk and exposure to loss in the event of a restructuring by obtaining some or all of the following: improved documentation, additional guaranties, increase in curtailments, reduction in collateral release terms, additional collateral or other similar strategies.
17
The following table outlines the amount of each troubled debt restructuring categorized by loan classification made during the three and six months ended June 30, 2014 and 2013 (dollars in thousands):
|
Three months ended June 30, 2014
|
Six months ended June 30, 2014
|
||||||||||||||||||||||
|
Number
of contracts
|
Pre
Modification Outstanding Recorded Investment
|
Post Modification Outstanding Recorded Investment, net of related allowance
|
Number of contracts
|
Pre
Modification Outstanding Recorded Investment
|
Post
Modification Outstanding Recorded Investment, net of related allowance
|
||||||||||||||||||
Commercial real estate – mortgage
|
-
|
$
|
-
|
$
|
-
|
-
|
$
|
-
|
$
|
-
|
||||||||||||||
Consumer real estate – mortgage
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||
Construction and land development
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||
Commercial and industrial
|
1
|
75
|
59
|
7
|
2,955
|
2,099
|
||||||||||||||||||
Consumer and other
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||
|
1
|
$
|
75
|
$
|
59
|
7
|
$
|
2,955
|
$
|
2,099
|
|
Three months ended June 30, 2013
|
Six months ended June 30, 2013
|
||||||||||||||||||||||
|
Number
of contracts
|
Pre
Modification Outstanding Recorded Investment
|
Post Modification Outstanding Recorded Investment, net of related allowance
|
Number of contracts
|
Pre
Modification Outstanding Recorded Investment
|
Post
Modification Outstanding Recorded Investment, net of related allowance
|
||||||||||||||||||
Commercial real estate – mortgage
|
-
|
$
|
-
|
$
|
-
|
-
|
$
|
-
|
$
|
-
|
||||||||||||||
Consumer real estate – mortgage
|
-
|
-
|
-
|
1
|
428
|
355
|
||||||||||||||||||
Construction and land development
|
1
|
51
|
44
|
1
|
51
|
44
|
||||||||||||||||||
Commercial and industrial
|
1
|
1,500
|
1,290
|
1
|
1,500
|
1,290
|
||||||||||||||||||
Consumer and other
|
-
|
-
|
-
|
1
|
193
|
164
|
||||||||||||||||||
|
2
|
$
|
1,551
|
$
|
1,334
|
4
|
$
|
2,172
|
$
|
1,853
|
During the three months ended June 30, 2014 and 2013, Pinnacle Financial did not have any troubled debt restructurings that subsequently defaulted within twelve months of the restructuring. During the six months ended June 30, 2014, Pinnacle Financial did not have any troubled debt restructurings that subsequently defaulted within twelve months of the restructuring. During the six months ended June 30, 2013, two consumer real estate loans totaling $1.0 million which were previously classified as a troubled debt restructuring subsequently defaulted due to their lack of performance, within twelve months of the restructuring. A default of a troubled debt restructuring is defined as an occurrence which violates the terms of the receivable's restructured contract.
18
Pinnacle Financial analyzes its commercial loan portfolio to determine if a concentration of credit risk exists to any industry. Pinnacle Financial utilizes broadly accepted industry classification systems in order to classify borrowers into various industry classifications. Pinnacle Financial has a credit exposure (loans outstanding plus unfunded lines of credit) exceeding 25% of Pinnacle Bank's total risk-based capital to borrowers in the following industries at June 30, 2014 with the comparative exposures for December 31, 2013 (in thousands):
|
At June 30, 2014:
|
|||||||||||||||
|
Outstanding Principal Balances
|
Unfunded Commitments
|
Total exposure
|
Total Exposure at December 31, 2013
|
||||||||||||
|
||||||||||||||||
Lessors of nonresidential buildings
|
$
|
477,902
|
$
|
73,210
|
$
|
551,112
|
$
|
515,240
|
||||||||
Lessors of residential buildings
|
245,782
|
33,609
|
279,391
|
270,773
|
The table below presents past due balances at June 30, 2014 and December 31, 2013, by loan classification and segment allocated between accruing and nonaccrual status (in thousands):
June 30, 2014
|
30-89 days past due and accruing
|
90 days or more past due and accruing
|
Total past due and accruing
|
Nonaccrual(1)
|
Current
and accruing
|
Total
Loans
|
||||||||||||||||||
Commercial real estate:
|
||||||||||||||||||||||||
Owner-occupied
|
$
|
914
|
$
|
280
|
$
|
1,194
|
$
|
6,754
|
$
|
694,903
|
$
|
702,851
|
||||||||||||
All other
|
21
|
-
|
21
|
-
|
754,463
|
754,484
|
||||||||||||||||||
Consumer real estate – mortgage
|
5,402
|
-
|
5,402
|
6,239
|
686,887
|
698,528
|
||||||||||||||||||
Construction and land development
|
5,083
|
-
|
5,083
|
978
|
286,814
|
292,875
|
||||||||||||||||||
Commercial and industrial
|
3,581
|
51
|
3,632
|
1,387
|
1,692,615
|
1,697,634
|
||||||||||||||||||
Consumer and other
|
3,561
|
318
|
3,879
|
320
|
164,991
|
169,190
|
||||||||||||||||||
|
$
|
18,562
|
$
|
649
|
$
|
19,211
|
$
|
15,678
|
$
|
4,280,673
|
$
|
4,315,562
|
December 31, 2013
|
||||||||||||||||||||||||
Commercial real estate:
|
||||||||||||||||||||||||
Owner-occupied
|
$
|
2,534
|
$
|
-
|
$
|
2,534
|
$
|
7,750
|
$
|
669,014
|
$
|
679,298
|
||||||||||||
All other
|
27
|
2,232
|
2,259
|
1,267
|
700,611
|
704,137
|
||||||||||||||||||
Consumer real estate – mortgage
|
2,215
|
-
|
2,215
|
5,289
|
688,112
|
695,616
|
||||||||||||||||||
Construction and land development
|
4,839
|
-
|
4,839
|
1,070
|
310,282
|
316,191
|
||||||||||||||||||
Commercial and industrial
|
1,847
|
825
|
2,672
|
2,565
|
1,600,310
|
1,605,547
|
||||||||||||||||||
Consumer and other
|
1,488
|
289
|
1,777
|
242
|
141,685
|
143,704
|
||||||||||||||||||
|
$
|
12,950
|
$
|
3,346
|
$
|
16,296
|
$
|
18,183
|
$
|
4,110,014
|
$
|
4,144,493
|
(1)
|
Approximately $10.7 million and $10.9 million of nonaccrual loans as of June 30, 2014 and December 31, 2013, respectively, were performing pursuant to their contractual terms at those dates.
|
19
The following table shows the allowance allocation by loan classification and accrual status at June 30, 2014 and December 31, 2013 (in thousands):
|
Impaired Loans
|
|||||||||||||||||||||||||||||||
|
Accruing Loans
|
Nonaccrual Loans
|
Troubled Debt Restructurings(1)
|
Total Allowance
for Loan Losses
|
||||||||||||||||||||||||||||
|
June 30, 2014
|
December 31, 2013
|
June 30, 2014
|
December 31, 2013
|
June 30, 2014
|
December 31, 2013
|
June 30, 2014
|
December 31, 2013
|
||||||||||||||||||||||||
Commercial real estate –mortgage
|
$
|
19,149
|
$
|
19,298
|
$
|
190
|
$
|
142
|
$
|