Pinnacle Q1 EPS jumps 86%

Fee income growth, OREO shrink help power strong numbers

Pinnacle Financial Partners posted a first-quarter profit of $13.5 million, nearly double its year-ago mark, helped mainly by higher fee income and a drop in costs related to real estate the bank had to take back from clients during the recession.

Per diluted share, Pinnacle earned 39 cents during the first three months of this year versus 21 cents in early 2012. Analysts had expected the downtown-based company to post a profit of 33 cents.

“For many financial metrics [...] we are now operating at higher levels than ever before in the history of the firm,” said President and CEO Terry Turner. “These results demonstrate significant core earnings growth and further validate our potential to reach our long-term profitability targets.”

Pinnacle’s loan portfolio grew about 2 percent during the quarter to almost $3.8 billion, with a $100 million rise in commercial mortgages more than offsetting a $43 million drop in core commercial and industrial loans due to higher-than-normal pay-downs. Net interest margin for the quarter came in at 3.90 percent, up from 3.80 percent late last year, but CFO Harold Carpenter told investors that was a bit of an outlier due to the combination of higher loan balances and lower deposit costs.

Fee income was helped primarily by mortgage refinancing activity and higher interchange revenues and swap fees. On the cost side, so-called “other real estate” expenses fell to $721,000 from almost $4.7 million last year.

The better-than-expected results led Wunderlich Securities analyst Kevin Reynolds to upgrade Pinnacle shares to ‘buy’ from ‘hold’ early Tuesday. Reynolds also raised his price target to $26 from $23. Pinnacle (Ticker: PNFP) closed Monday trading at $21.68.