| Pinnacle reports $0.12/share for 4th quarter of '09 |
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Posted: Wednesday, January 20, 2010 11:15 am
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Pinnacle Financial Partners, Inc. (Nasdaq/NGS: PNFP) today reported its preliminary fourth quarter results. Loss per fully diluted common share available to common stockholders was $0.12 for the quarter ended Dec. 31, 2009, compared to earnings per fully diluted common share available to common stockholders for the quarter ended Dec. 31, 2008, of $0.31.
Fully diluted loss per common share available to common stockholders was $1.46 for the year ended Dec. 31, 2009, compared to earnings per fully diluted common share available to common stockholders for the year ended Dec. 31, 2008, of $1.27.
SUMMARY OF KEY POINTS:
During the fourth quarter, Pinnacle continued its emphasis on aggressively addressing problem loans and expanding the core earnings capacity of the firm. Specifically:
· Pinnacle increased the loan loss allowance and associated provision expense during the fourth quarter of 2009.
· Pinnacle’s 25.2 percent annual growth rate in core deposits (all deposits except time deposits greater than $100,000) reflects the continued growth in its client base in Nashville and Knoxville.
· Net interest margin increased from 3.05 percent for the quarter ended Sept. 30, 2009, to 3.19 percent for the quarter ended Dec. 31, 2009.
· Revenue (the sum of net interest income and noninterest income) grew 19.2 percent from the fourth quarter of 2008 to the fourth quarter of 2009.
Loans decreased during the fourth quarter of 2009 by $44.5 million, compared to growth of $64 million in the third quarter of 2009. Contributing to the net decrease in loans during the fourth quarter of 2009 were foreclosures of approximately $34.2 million and net charge-offs of approximately $6.7 million. At Dec. 31, 2009, Pinnacle’s allowance for loan losses was 2.58 percent of total loans, compared to 2.30 percent at Sept. 30, 2009, and 1.09 percent at Dec. 31, 2008.
“Our fourth quarter results reflect increased provisioning due primarily to the impact that this economic cycle continues to have on the local real estate markets and the influence it has on our borrowers," said M. Terry Turner, Pinnacle’s president and chief executive officer. "Credit quality remains the primary area of focus for us. That said, we are pleased to report that, absent credit costs, we were able to grow the operating earnings of our firm even in this environment.
“We have now experienced three consecutive quarters of net interest margin expansion,” Turner said. “Excluding the impact of $8.4 million in other real estate expenses and as further evidence of our efforts to increase the operating leverage our firm, our noninterest expense increased by $1.02 million between the third and fourth quarters of 2009, compared to a $2.92 million increase in total revenue for the same time period.”
FOURTH QUARTER 2009 HIGHLIGHTS:
· Operating results
o Revenue for the quarter ended Dec. 31, 2009, amounted to $45.21 million, compared to $37.93 million for the same quarter of last year, an increase of 19.2 percent.
o Net loss available to common stockholders for the fourth quarter of 2009 was $3.98 million, compared to the prior year’s fourth quarter net income available to common stockholders of $7.74 million.
· Balance sheet growth
o Total deposits at Dec. 31, 2009, were $3.82 billion, up $290 million from $3.53 billion at Dec. 31, 2008, representing an annual growth rate of 8.2 percent.
o Core funding amounted to $2.59 billion at Dec. 31, 2009, an increase of 25.2 percent from $2.07 billion at Dec. 31, 2008. Core funding also increased by $344 million, or 15.4 percent, during the fourth quarter of 2009.
o Loans at Dec. 31, 2009, were $3.56 billion, up $208 million from $3.35 billion at Dec. 31, 2008, representing an annual growth rate of 6.2 percent.
· Credit quality
o Net charge-offs were $6.7 million for the three months ended Dec. 31, 2009, compared to $2.1 million for the three months ended Dec. 31, 2008. Net charge-offs as a percentage of average loan balances were 0.75 percent (annualized) for the three months ended Dec. 31, 2009, compared to 0.25 percent (annualized) for the three months ended Dec. 31, 2008. Net charge-offs as a percentage of average loan balances were 1.71 percent for the year ended Dec. 31, 2009, compared to 0.10 percent for the year ended Dec. 31, 2008. The $21.5 million charge-off of a loan to a bank holding company disclosed in May 2009 accounted for 0.60 percent of net charge-offs as a percentage of average loan balances for the year ended Dec. 31, 2009.
o Nonperforming assets were 4.29 percent of total loans and other real estate at Dec. 31, 2009, compared to 0.86 percent at Dec. 31, 2008.
o Past due loans over 30 days, excluding nonperforming loans, were 0.46 percent of total loans at Dec. 31, 2009, compared to 0.60 percent at Dec. 31, 2008.
· Capital
o At Dec. 31, 2009, Pinnacle’s ratio of tangible common stockholders’ equity to tangible assets was 7.3 percent, compared to 6.2 percent at Dec. 31, 2008. Pinnacle’s tangible book value per common share was $10.71 at Dec. 31, 2009, compared to $11.70 at Dec. 31, 2008.
o At Dec. 31, 2009, Pinnacle’s total risk-based capital ratio was 14.8 percent, compared to 13.5 percent at Dec. 31, 2008.
“Loan balances actually decreased during the fourth quarter due to a number of factors, including our intentional reduction in residential construction and development, tightened credit underwriting, increased charge-offs and foreclosures as well as weaker loan demand,” Turner said. “Additionally, we expect relatively weak loan demand throughout 2010 as borrowers and business owners continue to evaluate the depth of this economic cycle. Our construction and development portfolio as a percentage of total loans has decreased from 19.2 percent at Dec. 31, 2008, to 14.7 percent at Dec. 31, 2009. Our goal is to continue to decrease our exposure to construction and development loans throughout this year.
“Nonperforming assets increased by $9.8 million during the fourth quarter of 2009,” Turner said. “We continue to aggressively seek resolution of troubled assets. Given the uncertainty as to when the economic landscape will improve, we cannot forecast that our nonperforming assets have peaked; however, over the next few quarters, we are hopeful that as we look back on 2009 we will be able to see that nonperforming loans did in fact peak in the fourth quarter of 2009.”
CREDIT QUALITY
· Allowance for loan losses represented 2.58 percent of total loans at Dec. 31, 2009, compared to 2.30 percent at Sept. 30, 2009, and 1.09 percent a year ago.
· Provision for loan losses was $15.69 million for the fourth quarter of 2009, compared to $3.71 million for the fourth quarter of 2008.
o During the fourth quarter of 2009, the firm recorded net charge-offs of $6.7 million, compared to net charge-offs of $2.1 million during the same period in 2008. Net charge-offs to total average loans were 1.71 percent for the year ended Dec. 31, 2009.
“During the fourth quarter we experienced net charge-offs of approximately $6.7 million, including $5.2 million in our construction and development loan portfolio,” Turner said. “We remain committed to the aggressive disposition of troubled assets throughout this next year.”
Pinnacle reported that nonperforming loans and other real estate owned as a percentage of total loans and other real estate owned increased from 3.98 percent at Sept. 30, 2009, to 4.29 percent at Dec. 31, 2009.
REVENUE
· Net interest income for the fourth quarter 2009 was $37.03 million, compared to $29.89 million for the same quarter last year, an increase of 23.88 percent.
o Net interest margin for the fourth quarter of 2009 was 3.19 percent, compared to a net interest margin of 3.05 percent for the third quarter of 2009 and 2.96 percent for the same period last year.
· Noninterest income for the fourth quarter 2009 was $8.18 million, a 1.70 percent increase from the $8.04 million recorded during the same quarter in 2008.
“We are pleased with the continued expansion of our net interest margins this year,” said Harold Carpenter, Pinnacle’s chief financial officer. “Our fourth quarter net interest income is up more than $7 million from the fourth quarter of 2008. We are also pleased with growth in core funding, as we believe that core deposit growth will be the primary source of continued improvement in our margins for the next several quarters.”
Net interest income was $37.03 million during the fourth quarter of 2009, which represented an increase of 7.19 percent over third quarter of 2009 and an increase of 23.88 percent over the fourth quarter of 2008. This year-over-year increase was attributable to increased loan volumes funded with less expensive deposits. The continued funding shift from time deposits to money market accounts also contributed to the increase in net interest income this year compared to previous periods.
During the fourth quarter of 2009, Pinnacle's mortgage origination unit sold $121 million of mortgage loans, compared to $114 million sold during the third quarter of 2009 and $72.1 million during the fourth quarter of 2008. Gross fees on these loan sales were $1.88 million in the fourth quarter of 2009, compared to $1.83 million in the third quarter of 2009 and $1.46 million in the fourth quarter of 2008.
NONINTEREST EXPENSE
· Noninterest expense for the quarter ended Dec. 31, 2009, was $35.45 million, compared to $27.28 million in the third quarter of 2009 and $22.59 million in the fourth quarter of 2008.
· Compensation expense was $15.04 million during the fourth quarter of 2009, compared to $14.25 million during the third quarter of 2009 and $10.01 million during the fourth quarter of 2008.
· Included in noninterest expense for the fourth quarter of 2009 was $8.4 million in other real estate expenses, of which $5.4 million was attributable to losses on the sale of other real estate properties. Fourth quarter 2009 other real estate expense was approximately $7.1 million more than third quarter 2009 other real estate expense.
· The efficiency ratio (noninterest expense divided by net interest income and noninterest income) was 78.4 percent during the fourth quarter of 2009, compared to 64.5 percent for the third quarter of 2009 and 59.5 percent in the fourth quarter of 2008.
Investments in future growth
· Pinnacle has hired 45 highly experienced associates for its denovo expansion to Knoxville that was announced on April 9, 2007. Loans outstanding in Knoxville at Dec. 31, 2009, were $436.5 million. Pinnacle opened two full-service offices in the Fountain City and Farragut areas of Knoxville during the fourth quarter of 2009.
· Pinnacle also has two new Nashville offices and another Nashville location under construction. The new Belle Meade office opened in December 2009. The new Brentwood office, which consolidated Pinnacle’s two existing Brentwood locations, opened last week. The firm anticipates the new 100 Oaks office will open in the first half of 2010.
· Pinnacle's total associate base at Dec. 31, 2009, was 777.0 full-time equivalents (FTEs), compared to 719.0 at Dec. 31, 2008. Pinnacle anticipates increasing its associate base by approximately 50 associates during 2010.
Pinnacle Financial Partners provides a full range of banking, investment, mortgage and insurance products and services designed for small- to mid-sized businesses and their owners, real estate professionals and individuals interested in a comprehensive relationship with their financial institution. Comprehensive wealth management services, such as financial planning and trust, help clients increase, protect and distribute their assets.
The firm began operations in a single downtown Nashville location in Oct. 2000 and has since grown to over $5.1 billion in assets at Dec. 31, 2009. In 2007, Pinnacle launched an expansion into Knoxville, another high growth MSA. At Dec. 31, 2009, Pinnacle is the second-largest bank holding company headquartered in Tennessee, with 31 offices in eight Middle Tennessee counties and three in Knoxville. The firm was also added to Standard & Poor’s SmallCap 600 index in 2009.
Additional information concerning Pinnacle can be accessed at www.pnfp.com.
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