Home >> About Pinnacle >> News Releases

News Releases:

MEDIA CONTACT: Vicki Kessler 615-320-7532
FINANCIAL CONTACT: Harold Carpenter 615-744-3742
WEBSITE: www.pnfp.com

Pinnacle Financial Reports Continued Rapid Growth and Record Earnings
Assets grow to $979 million and diluted earnings per share is $0.22

Nashville, Tenn., Oct. 18, 2005 - Pinnacle Financial Partners Inc. (Nasdaq: PNFP) today reported record earnings for the quarter ended Sept. 30, 2005.

THIRD QUARTER 2005 HIGHLIGHTS:

• Record net income of $2.08 million, up 49.5 percent from the prior year's $1.39 million
• Record diluted earnings per share of $0.22, up 37.5 percent from the prior year's $0.16
• Strong balance sheet growth:
• Average loans up 50 percent from the same period last year
• Average total deposits up 51 percent from the same period last year, with average noninterest bearing demand deposit accounts up 54 percent from the same period last year
• Superior credit quality:
  • Past due loans over 30 days of only 0.10 percent of total loans
  • Nonperforming assets of only 0.01 percent of total loans and other real estate

"We are again reporting continued rapid growth in assets and earnings," said M. Terry Turner, president and CEO of Pinnacle Financial Partners. "As we approach our fifth anniversary later this month, it is gratifying to continue to set new quarterly records in many categories, including deposit growth. Based on our performance in the third quarter, we fully expect to exceed our previous guidance of $1 billion in assets by the end of 2005."

FINANCIAL PERFORMANCE

• Return on average assets for the quarter ended Sept. 30, 2005, was 0.90 percent, compared to 0.89 percent for the same quarter last year.
• Return on average stockholders' equity for the quarter ended Sept. 30, 2005, was 13.23 percent, compared to 12.58 percent for the same quarter last year.

Total assets grew to $979 million as of Sept. 30, 2005, up $293 million or 43 percent from the $685 million reported at Sept. 30, 2004. Loans as of Sept. 30, 2005, were $604 million, up $169 million or 39 percent from the $435 million reported at Sept. 30, 2004. Total deposits increased to $789 million at Sept. 30, 2005, or 46 percent higher than the $542 million reported a year ago.

REVENUE

• Revenue (the sum of net interest income and noninterest income) for the quarter ended Sept. 30, 2005, amounted to $8.8 million, compared to $6.9 million for the same quarter of last year, an increase of 27.0 percent.
• Net interest income for the quarter ended Sept. 30, 2005, was $7.46 million, compared to $5.30 million for the quarter ended Sept. 30, 2004, an increase of 40.7 percent.
• Net interest margin for the third quarter of 2005 was 3.48 percent, compared to a net interest margin of 3.62 percent reported during the third quarter in 2004 and 3.57 percent for the second quarter of 2005.
• Percentage of daily floating rate loans to total loans was 56.4 percent at Sept. 30, 2005.
• Noninterest income for the quarter ended Sept. 30, 2005, was $1,299,000, compared to $1,593,000 during the same quarter in 2004, a decrease of 18.4 percent.

"The decline in our net interest margin during the third quarter of 2005 was due to several factors, with the primary contributors being continued increases in deposit rates and our decision to maintain increased liquidity throughout the quarter," said Harold Carpenter, chief financial officer of Pinnacle Financial Partners. "Our marketing and customer retention activities yielded significant deposit growth during the third quarter. Based on current sales pipelines, we anticipate another strong quarter of loan growth in the fourth quarter of 2005. This puts Pinnacle in a great position to deploy this excess liquidity rapidly. Our internal models continue to indicate that our balance sheet remains structurally asset sensitive. Although Nashville continues to be a very competitive deposit pricing market, we believe we should maintain our net interest margin for the remainder of the year. Even though our margin was less than we anticipated, our growth continues to provide the top line revenues we require to meet our objectives. Our net interest income was approximately $7.5 million for the third quarter, compared to $6.8 million in the second quarter of 2005 and compared to $5.3 million in the same period last year. This represents a year over year growth of 41 percent in net interest income which we directly attribute to our associates continuing to increase the number of profitable loan and deposit relationships at our firm."

At June 30, 2005, the ratio of investment securities to total assets declined to 25.2 percent from the 28.2 percent reported a year ago. Pinnacle anticipates that this ratio will approximate 25.0 to 27.0 percent for the remainder of 2005, representing a slight shift in asset mix.

Noninterest income was $1,299,000 during the third quarter of 2005, compared to $1,593,000 for the same period last year, a decrease of $294,000. Gains on sales of loan participations and investment securities were lower between the two quarters by $246,000 and $109,000, respectively. For the quarter ended Sept. 30, 2005, noninterest income represented approximately 14.8 percent of total revenues, compared to 23.1 percent for the same quarter in 2004.

NONINTEREST EXPENSE

• Noninterest expense for the quarter ended June 30, 2005, was $5.52 million, compared to $3.92 million for the same quarter in 2004.
• Efficiency ratio (noninterest expense divided by net interest income and noninterest income) was 63.1 percent during the third quarter of 2005, compared to 56.9 percent during the third quarter of 2004.

Compensation and employee benefits expense increased approximately 38.9 percent over the same quarter last year due primarily to an increase in personnel. At Sept. 30, 2005, Pinnacle employed 153 full-time equivalent personnel, compared to 116 at Sept. 30, 2004, an increase of approximately 32 percent. Equipment and occupancy expenses increased 76.1 percent over the same period last year due in large part to increased square footage for operating units at the firm's downtown Nashville location and additional branch offices, including the West End location in Davidson County, the Franklin location in Williamson County and the Hendersonville location in Sumner County.

CREDIT QUALITY

• Provision for loan losses was $366,000 for the third quarter of 2005, compared to $1,012,000 in the third quarter in 2004. The following impacted the amount of the provision for loan losses in the third quarter of 2005 when compared to the same period in 2004:
• Loan growth in the third quarter of 2005 of $47 million, compared to loan growth of $80 million in the third quarter of 2004.
• During the third quarter of 2005, a $230,000 recovery was recorded from a previously charged-off commercial loan. This recovery exceeded gross charge-offs of $26,000 during the quarter, resulting in the firm reporting net recoveries of $206,000 in the third quarter of 2005 compared to net charge-offs of $43,000 during the same period in 2004.
• Allowance for loan losses represented 1.20 percent of total loans at Sept. 30, 2005, compared to 1.26 percent at June 30, 2004.
• With the significant recovery noted above, the firm's recoveries have exceeded gross charge-off's such that on an annualized basis, the net recovered position approximates (0.03) percent of average loans for 2005 compared to a net charge-off position of 0.04 percent for 2004.
• Nonperforming assets as a percentage of total loans and other real estate decreased to 0.01 percent at Sept. 30, 2005, from 0.31 percent at Sept. 30, 2004.

"We remain extremely pleased with the credit quality of our firm," said Turner. "In the first nine months of this year, asset quality indicators have been excellent. We continue to believe that our asset quality is a key predictor of our ability to create long-term shareholder value."

OTHER THIRD QUARTER 2005 DEVELOPMENTS

• Pinnacle continued to focus on treasury management services and growth in demand deposit accounts. For the quarter ended September 30, 2005, average noninterest-bearing deposit balances averaged $125 million, compared to $85 million for the same quarter last year, an increase of 47 percent. "Average noninterest bearing demand accounts increased by $14 million during the third quarter of 2005," said Robert A. McCabe Jr., chairman of Pinnacle's board of directors. "We are very pleased with our progress in making Pinnacle the premier treasury management firm in Nashville."
• Pinnacle concluded the offering of $20 million in trust preferred securities to provide regulatory capital to support Pinnacle's continued rapid growth.
• Pinnacle grew to 155 associates (153 full-time equivalent) at Sept. 30, 2005, with 107 working in client contact areas and 48 in operational and corporate areas. This represents an increase of 32 employees from the 123 employees as of Dec. 31, 2004. Pinnacle's annual retention rate was 96 percent at Sept. 30, 2005, representing a very high level of engagement for Pinnacle's associates. Approximately eight associate additions are currently planned for the remainder of 2005, including five in client contact areas.
• Pinnacle is considering a ninth location to be opened in 2006 in the Donelson/Hermitage area of Davidson County within the Nashville-Davidson-Murfreesboro MSA. Additionally, Pinnacle has been successful in recruiting a 16-year veteran from a large regional bank holding company to lead Pinnacle's efforts at that location.

PROGRESS OF CAVALRY ACQUISITION

On October 3, 2005, Pinnacle reported that the firm had entered into a definitive agreement to acquire the common stock of Cavalry Bancorp, a one-bank holding company in Murfreesboro, Tenn., with assets of $632 million as of September 30, 2005. Since that date:

• The two companies have announced the formation of a joint merger integration team to be led by Hugh M. Queener of Pinnacle and Bill Jones of Cavalry.
• Pinnacle filed a Form S-4 with the Securities and Exchange Commission on Oct. 17, 2005, detailing various aspects of the merger and the information to be included in the companies' joint proxy statement/prospectus.

INVESTMENT OUTLOOK

Management has developed several financial forecast scenarios for the next several quarters. Based on anticipated growth trends and future investments in the franchise, Pinnacle estimates its fourth quarter 2005 diluted earnings per share will approximate $0.23, exclusive of merger-related charges, if any. As a result, Pinnacle's estimate for diluted earnings per share for the year ending Dec. 31, 2005, is projected to be approximately $0.85 per fully diluted share. Pinnacle currently estimates total asset balances will exceed $1 billion by the end of 2005 as a result of continued organic growth. Pinnacle continues to anticipate significant loan demand for the remainder of 2005 and early 2006 and, as a result, has considered the increased provision for loan losses associated with increased loan balances in these estimates.

In its Oct. 3, 2005, news release, Pinnacle also included earnings guidance estimates for 2006 of $1.14 to $1.22 per fully diluted share which includes an estimate for compensation expense related to the expensing of stock options that have been and may be granted to employees under the firm's broad-based stock option plans.

As noted previously, management has developed several scenarios under which these estimates can be achieved and believes these estimates to be reasonable based on these scenarios. However, unanticipated events or developments, including the execution of any initiative involving the development of any market other than the current Nashville-Davidson County-Murfreesboro franchise, the opportunity to hire more seasoned professionals than anticipated or the ability to grow loans significantly in excess of the levels contemplated, may cause the actual results of Pinnacle to differ materially from these estimates.

Pinnacle Financial Partners, the largest financial services firm headquartered in Nashville, provides a full range of banking, investment and insurance products and services designed for small- to mid-sized businesses and their owners/operators. Pinnacle provides financial planning services by a certified financial planner (CFP ®), and a number of Pinnacle's senior financial advisors provide comprehensive wealth management services to help clients increase, protect and distribute their assets.

Pinnacle opened its first office in October 2000 in Commerce Center in downtown Nashville. Since then the firm has added Nashville offices in the Rivergate, Green Hills and West End areas; in Hendersonville in Sumner County; and in the Brentwood, Cool Springs and Franklin areas in Williamson County. Additional information concerning Pinnacle can be accessed at www.pnfp.com.

###

Certain of the statements in this release may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words "expect," "anticipate," "intend," "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. All forward-looking statements are subject to risks, uncertainties and other facts that may cause the actual results, performance or achievements of Pinnacle to differ materially from any results expressed or implied by such forward-looking statements. Such factors include, without limitation, (i) unanticipated deterioration in the financial condition of borrowers resulting in significant increases in loan losses and provisions for those losses, (ii) the inability of Pinnacle to continue to grow its loan portfolio at historic rates, (iii) increased competition with other financial institutions, (iv) lack of sustained growth in the economy in the Nashville, Tennessee area, (v) rapid fluctuations or unanticipated changes in interest rates, (vi) the inability of Pinnacle to satisfy regulatory requirements for its expansion plans, (vii) the inability of Pinnacle to execute its expansion plans including the consummation of its merger with Cavalry Bancorp and (viii) changes in the legislative and regulatory environment. A more detailed description of these and other risks is contained in Pinnacle's most recent annual report on Form 10-K. Many of such factors are beyond Pinnacle's ability to control or predict, and readers are cautioned not to put undue reliance on such forward-looking statements. Pinnacle disclaims any obligation to update or revise any forward-looking statements contained in this release, whether as a result of new information, future events or otherwise.

This communication is not a solicitation of a proxy from any security holder of Pinnacle Financial Partners, Inc. or Cavalry Bancorp, Inc. Pinnacle has filed a registration statement on Form S-4 with the Securities and Exchange Commission ("SEC") in connection with the proposed merger of Pinnacle and Cavalry. The Form S-4 contains a joint proxy statement/prospectus and other documents for the shareholders' meeting of Pinnacle and Cavalry at which time the proposed merger will be considered. The Form S-4 and joint proxy statement/prospectus contain important information about Pinnacle, Cavalry, the merger and related matters.

INVESTORS AND SECURITY HOLDERS ARE ENCOURAGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS WHEN IT BECOMES AVAILABLE AND ANY OTHER RELEVANT DOCUMENTS TO BE FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED TRANSACTION BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT PINNACLE, CAVALRY AND THE PROPOSED TRANSACTION.

Investors and security holders may obtain free copies of these documents once they are available through the website maintained by the SEC at http://www.sec.gov. Free copies of the joint proxy statement/prospectus also may be obtained by directing a request by telephone or mail to Pinnacle Financial Partners Inc., 211 Commerce Street, Suite 300, Nashville, TN 37201, Attention: Investor Relations (615) 744-3710 or Cavalry Bancorp, 114 West College Street, P.O. Box 188, Murfreesboro, TN 37133, Attention: Investor Relations (615) 849-2272.

This communication shall not constitute an offer to sell or the solicitation of an offer to buy securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.

Participants in the Solicitation

The directors and executive officers of Pinnacle and Cavalry may be deemed to be participants in the solicitation of proxies with respect to the proposed transaction. Information about Pinnacle's directors and executive officers is contained in the proxy statement filed by Pinnacle with the Securities and Exchange Commission on March 14, 2005, which is available on Pinnacle's web site (www.pnfp.com) and at the address provided above. Information about Cavalry's directors and executive officers is contained in the proxy statement filed by Cavalry with the Securities and Exchange Commission on March 18, 2005, which is available on Cavalry's website (www.cavb.com). Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests by security holding or otherwise, will be contained in the joint proxy statement/prospectus and other relevant material to be filed with the Securities and Exchange Commission when they become available.