Pinnacle Q4 doubles on quickening growth

Strong C&I performance coupled with more credit quality improvements

Pinnacle Financial Partners reported fourth-quarter earnings of $11.7 million, more than double its year-ago number, on the back of strong growth in both loan and fee income as well as a lower loan loss provision. Per diluted share, the bank's 34-cent profit was in line with what analysts had been expecting.

Interest income grew 7 percent during the quarter to $41.7 million, helped by the addition during the quarter of almost $170 million of commercial and industrial loans. Overall loans grew by about $190 million in the three months ended Dec. 31, a big increase from the average of $57 million over the previous four quarters.

On the fee side, deposit charges and investment services fees combined to grow $1 million from late 2011. Deposits, meanwhile, grew by $300 million during the quarter and topped $4 billion for the first time while total assets ended 2012 at a little more than $5 billion.

“Our loan portfolio has changed meaningfully over the last three years as we reduced problem assets and our exposure to residential construction,” said CFO Harold Carpenter. “At the same time, we have been focusing on growing our commercial and commercial real estate portfolios, which have long been the primary focus of our firm. Additionally, our funding base has changed significantly, with core funding comprising 89.9 percent of our funding base at year-end 2012 compared to 58.7 percent at year-end 2009.”

Improving credit quality has been a key part of Pinnacle's profit recovery story in recent quarters, and the last three months of 2012 extended that trend. Total nonperforming assets fell to $41.4 million at year's end, down from almost $90 million the year before, while the company's total loan loss allowance dipped to 1.87 percent of total assets versus 1.96 percent on Sept. 30.

"With the ratio of nonperforming assets to total loans plus OREO of 1.11 percent and with the steady reduction in troubled asset inflows, we believe the rehabilitation of our balance sheet is substantially complete," said President and CEO Terry Turner. "We can now further intensify our focus and resources on growing our franchise in Middle and East Tennessee consistent with the competitive opportunities that exist for us in these two very attractive banking markets."

Shares of Pinnacle (Ticker: PNFP) ended Tuesday trading at $19.29, down about 1 percent on the day. They are flat over the past six months.