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SECURITIES AND EXCHANGE COMMISSION
of the Securities and Exchange Act of 1934
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Tennessee | 62-1812853 | |
(State of jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) | |
211 Commerce Street, Suite 300, Nashville, Tennessee | 37201 | |
(Address of principal executive offices) | (zip code) |
(Registrant’s telephone number, including area code)
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• | Customers generally perceive that service levels at banks are declining. We believe this is largely attributable to merger-related integration issues resulting from consolidation in the bank and brokerage industries. Additionally, small business owners want a reliable point of contact that is knowledgeable about their business and the financial products and services that are important to the success of their business. In fact, Nashville is dominated by three large regional bank holding companies, which are headquartered elsewhere, all of whom are experiencing declining market share trends over the last six years; |
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• | Client usage of more sophisticated financial products continues to grow, causing traditional banks to lose market share to other types of financial services companies, such as mutual fund companies and securities brokerage firms; and | ||
• | There is significant growth in the demand for convenient access to financial services, particularly through ATMs, telephone banking and Internet banking. |
• | Hire and retain highly experienced and qualified banking and financial professionals with successful track records and, for client contact personnel, established books of business with small businesses and affluent households within the Nashville MSA. Since inception, we have attracted 159 associates to our firm. Substantially all of these associates have been highly successful in similar positions in the Nashville MSA for at least 10 years. On average, our senior customer contact personnel have in excess of 20 years experience in Nashville. We have also been successful in maintaining an annual retention ratio of our personnel of approximately 94% at December 31, 2005. We believe we will continue to experience success in attracting new, market-best associates to our firm as well as retaining our highly experienced and successful group of associates. | ||
• | Provide individualized attention with consistent, local decision-making authority. | ||
• | Offer a full line of financial services to include traditional depository and credit products, as well as sophisticated investment and insurance products. As of December 31, 2005, Pinnacle National’s brokerage division, Pinnacle Asset Management, had accumulated approximately $441 million in brokerage assets. | ||
• | Capitalize on customer dissatisfaction that we believe exists and that has been caused by what we believe to be our competitors’ less than satisfactory response to the financial needs of today’s sophisticated consumers and small- to medium-sized businesses. Since we began our company, we have historically surveyed our customers on numerous matters related to their relationship with us. Consistently, these surveys indicate that our service quality is significantly better than their prior banking relationships. | ||
• | Build on our directors’ and officers’ diverse personal and business contacts, community involvement and professional expertise. | ||
• | Establish a distribution strategy designed to prudently expand our physical and virtual market presence, thereby providing convenient banking access for our clients 24 hours a day. We opened one new office in 2005 and intend to open one new office in 2006. Our courier deposit pickup service consistently receives high marks from our small business customers. We now have approximately 43% of our commercial clients utilizing our Internet banking product which we believe to be well over the industry averages. | ||
• | Use technology and strategic alliances, including those established through Pinnacle Asset Management to provide a broad array of sophisticated and convenient products and services. |
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• Mutual Funds | • Fixed Annuities | |
• Variable Annuities | • Stocks | |
• Money Market Instruments | • Financial Planning | |
• Treasury Securities | • Asset Management Accounts | |
• Bonds | • Listed Options |
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• | Acquiring direct or indirect ownership or control of any voting shares of any bank if, after the acquisition, the bank holding company will directly or indirectly own or control more than 5% of the bank’s voting shares; | ||
• | Acquiring all or substantially all of the assets of any bank; or |
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• | Merging or consolidating with any other bank holding company. |
• | The bank holding company has registered securities under Section 12 of the Securities Exchange Act of 1934; or | ||
• | No other person owns a greater percentage of that class of voting securities immediately after the transaction. |
• | Financial in nature; | ||
• | Incidental to a financial activity; or | ||
• | Complementary to a financial activity and do not pose a substantial risk to the safety or soundness of depository institutions or the financial system generally. |
• | Lending, trust and other banking activities; | ||
• | Insuring, guaranteeing, or indemnifying against loss or harm, or providing and issuing annuities, and acting as principal, agent, or broker for these purposes, in any state; | ||
• | Providing financial, investment, or advisory services; | ||
• | Issuing or selling instruments representing interests in pools of assets permissible for a bank to hold directly; | ||
• | Underwriting, dealing in or making a market in securities; |
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• | Activities that the Federal Reserve has determined to be so closely related to banking or managing or controlling banks as to be a proper incident to banking or managing or controlling banks; | ||
• | Activities permitted outside of the United States that the Federal Reserve has determined to be usual in connection with banking or other financial operations abroad; | ||
• | Merchant banking through securities or insurance affiliates; and | ||
• | Insurance company portfolio investments. |
• | Factoring accounts receivable; | ||
• | Acquiring or servicing loans; | ||
• | Leasing personal property; | ||
• | Conducting discount securities brokerage activities; | ||
• | Performing selected data processing services; | ||
• | Acting as agent or broker in selling credit life insurance and other types of insurance in connection with credit transactions; and | ||
• | Performing selected insurance underwriting activities. |
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• | A bank’s loans or extensions of credit to affiliates; | ||
• | A bank’s investment in affiliates; | ||
• | Assets a bank may purchase from affiliates, except for real and personal property exempted by the Federal Reserve; | ||
• | The amount of loans or extensions of credit to third parties collateralized by the securities or obligations of affiliates; and | ||
• | A bank’s guarantee, acceptance or letter of credit issued on behalf of an affiliate. |
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• | Federal Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers; | ||
• | Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; | ||
• | Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; | ||
• | Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies; | ||
• | Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; | ||
• | Bank Secrecy Act, governing how banks and other firms report certain currency transactions which may involve “money laundering” activities; | ||
• | Soldiers’ and Sailors’ Civil Relief Act of 1940, governing the repayment terms of, and property rights underlying, secured obligations of persons in military service; and | ||
• | Rules and regulations of the various federal agencies charged with the responsibility of implementing the federal laws. |
• | Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; and | ||
• | Electronic Funds Transfer Act and Regulation E issued by the Federal Reserve to implement that act, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services. |
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• | the loss of key employees and customers; | ||
• | the disruption of operations and business; | ||
• | the inability to maintain and increase competitive presence; | ||
• | deposit attrition, customer loss and revenue loss; | ||
• | possible inconsistencies in standards, control procedures and policies; | ||
• | unexpected problems with costs, operations, personnel, technology and credit; and/or | ||
• | problems from the assimilation of new operations, sites or personnel, which could divert resources from regular banking operations. |
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Approximate | 2005 Lease | Base Lease | Base Lease Term | |||||||||||||
Property Description | Sq. Footage | Payments | Expiration Date | with Renewal Periods | ||||||||||||
Office space at 211 Commerce Street | 30,000 | $ | 443,000 | August 31, 2010 | 20 years | |||||||||||
Brentwood branch office | Land only | 104,000 | March 31, 2010 | 20 years | ||||||||||||
Green Hills branch office | Land only | 52,000 | April 21, 2021 | 40 years | ||||||||||||
West End branch office building and land | 8,000 | 142,000 | March 28, 2014 | 20 years |
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(a) | A special meeting of Pinnacle Financial’s shareholders was held on December 21, 2005 to vote on the merger agreement with Cavalry Bancorp, Inc. | ||
(c) | Matters voted upon and the results of the voting were as follows: | ||
We held a Special Meeting of Shareholders on December 21, 2005 (the “Special Meeting”) to consider and vote on the following matters: |
§ | A proposal to approve the Agreement and Plan of Merger, dated as of September 30, 2005 by and between the Pinnacle Financial and Cavalry (“Proposal #1”); and | ||
§ | A proposal to approve the adjournment of the Special Meeting, if necessary, to permit the Pinnacle Financial to solicit additional proxies if there were not sufficient votes at the Special Meeting to constitute a quorum or to approve Proposal #1 (“Proposal #2”). |
The following table sets forth the number of votes cast for, against, and withheld/abstained with respect to each of the proposals, both of which were approved at the Special Meeting: |
Proposal #1: | Number of votes cast “For” | 5,202,146 | ||||
Number of votes cast “Against” | 71,543 | |||||
Number of abstentions | 920 | |||||
Proposal #2: | Number of votes cast “For” | 5,035,632 | ||||
Number of votes cast “Against” | 227,607 | |||||
Number of abstentions | 11,370 |
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Bid Price Per Share | ||||||||
High | Low | |||||||
2005: | ||||||||
First quarter | $ | 24.05 | $ | 20.72 | ||||
Second quarter | 25.14 | 20.50 | ||||||
Third quarter | 26.65 | 22.67 | ||||||
Fourth quarter | 25.96 | 21.70 | ||||||
2004: | ||||||||
First quarter | $ | 15.50 | $ | 11.65 | ||||
Second quarter | 18.67 | 13.50 | ||||||
Third quarter | 23.70 | 17.70 | ||||||
Fourth quarter | 25.10 | 21.35 |
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2005 | 2004 | 2003 | 2002 | 2001 | ||||||||||||||||
(in thousands, except per share data, ratios and percentages) | ||||||||||||||||||||
Statement of Financial Condition Data: | ||||||||||||||||||||
Total assets | $ | 1,016,772 | $ | 727,139 | $ | 498,421 | $ | 305,279 | $ | 175,439 | ||||||||||
Loans, net of unearned income | 648,024 | 472,362 | 297,004 | 209,743 | 134,440 | |||||||||||||||
Allowance for loan losses | (7,858 | ) | (5,650 | ) | (3,719 | ) | (2,677 | ) | (1,832 | ) | ||||||||||
Total securities | 279,080 | 208,170 | 139,944 | 73,980 | 19,886 | |||||||||||||||
Deposits and securities sold under agreements to repurchase | 875,985 | 602,655 | 405,619 | 249,067 | 147,917 | |||||||||||||||
Advances from FHLB | 41,500 | 53,500 | 44,500 | 21,500 | 8,500 | |||||||||||||||
Subordinated debt | 30,929 | 10,310 | 10,310 | — | — | |||||||||||||||
Stockholders’ equity | 63,436 | 57,880 | 34,336 | 32,404 | 18,291 | |||||||||||||||
Income Statement Data: | ||||||||||||||||||||
Interest income | $ | 46,308 | $ | 27,679 | $ | 18,262 | $ | 12,561 | $ | 6,069 | ||||||||||
Interest expense | 17,270 | 7,415 | 5,363 | 4,362 | 2,579 | |||||||||||||||
Net interest income | 29,038 | 20,264 | 12,899 | 8,199 | 3,490 | |||||||||||||||
Provision for loan losses | 2,152 | 2,948 | 1,157 | 938 | 1,670 | |||||||||||||||
Net interest income after provision for loan losses | 26,886 | 17,316 | 11,742 | 7,261 | 1,820 | |||||||||||||||
Noninterest income | 5,394 | 4,978 | 3,035 | 1,732 | 1,341 | |||||||||||||||
Noninterest expense | 21,032 | 14,803 | 10,796 | 7,989 | 6,363 | |||||||||||||||
Income (loss) before income taxes | 11,248 | 7,491 | 3,981 | 1,004 | (3,202 | ) | ||||||||||||||
Income tax expense (benefit) | 3,193 | 2,172 | 1,426 | 356 | (2,065 | ) | ||||||||||||||
Net income (loss) | $ | 8,055 | $ | 5,319 | $ | 2,555 | $ | 648 | $ | (1,137 | ) | |||||||||
Per Share Data: | ||||||||||||||||||||
Earnings (loss) per share – basic | $ | 0.96 | $ | 0.69 | $ | 0.35 | $ | 0.11 | $ | (0.29 | ) | |||||||||
Weighted average shares outstanding – basic | 8,408,663 | 7,750,943 | 7,384,106 | 6,108,942 | 3,963,196 | |||||||||||||||
Earnings (loss) per share – diluted | $ | 0.85 | $ | 0.61 | $ | 0.32 | $ | 0.10 | $ | (0.29 | ) | |||||||||
Weighted average shares outstanding – diluted | 9,464,500 | 8,698,139 | 7,876,006 | 6,236,844 | 3,963,196 | |||||||||||||||
Book value per share | $ | 7.53 | $ | 6.90 | $ | 4.65 | $ | 4.39 | $ | 3.96 | ||||||||||
Common shares outstanding at end of period | 8,426,551 | 8,389,232 | 7,384,106 | 7,384,106 | 4,624,106 | |||||||||||||||
Performance Ratios and Other Data: | ||||||||||||||||||||
Return on average assets | 0.93 | % | 0.89 | % | 0.66 | % | 0.29 | % | (1.19 | )% | ||||||||||
Return on average stockholders’ equity | 13.23 | % | 12.31 | % | 7.70 | % | 2.47 | % | (7.8 | )% | ||||||||||
Net interest margin (1) | 3.60 | % | 3.62 | % | 3.53 | % | 3.81 | % | 3.95 | % | ||||||||||
Net interest spread (2) | 3.16 | % | 3.34 | % | 3.23 | % | 3.42 | % | 3.29 | % | ||||||||||
Noninterest income to average assets | 0.62 | % | 0.83 | % | 0.78 | % | 0.76 | % | 1.41 | % | ||||||||||
Noninterest expense to average assets | 2.42 | % | 2.48 | % | 2.78 | % | 3.50 | % | 6.70 | % | ||||||||||
Efficiency ratio (3) | 61.1 | % | 58.6 | % | 67.8 | % | 80.4 | % | 131.7 | % | ||||||||||
Average loan to average deposit ratio | 81.3 | % | 79.0 | % | 85.5 | % | 98.5 | % | 94.9 | % | ||||||||||
Average interest-earning assets to average interest-bearing liabilities | 120.0 | % | 120.0 | % | 118.9 | % | 119.6 | % | 122.7 | % | ||||||||||
Average equity to average total assets ratio | 7.00 | % | 7.23 | % | 8.54 | % | 11.58 | % | 15.29 | % | ||||||||||
Asset Quality Ratios: | ||||||||||||||||||||
Allowance for loan losses to nonperforming assets | 1,708.3 | % | 1,006.9 | % | 981.3 | % | 143.4 | % | 732.8 | % | ||||||||||
Allowance for loan losses to total loans | 1.21 | % | 1.20 | % | 1.25 | % | 1.28 | % | 1.36 | % | ||||||||||
Nonperforming assets to total assets | 0.05 | % | 0.08 | % | 0.08 | % | 0.61 | % | 0.14 | % | ||||||||||
Nonaccrual loans to total loans | 0.07 | % | 0.12 | % | 0.13 | % | 0.89 | % | 0.19 | % | ||||||||||
Net loan charge-offs (recoveries) to average loans | (0.01 | )% | 0.27 | % | 0.05 | % | 0.05 | % | 0.00 | % | ||||||||||
Net charge-offs (recoveries) as a percentage of: | ||||||||||||||||||||
Provision for loan losses | (2.55 | )% | 34.49 | % | 9.94 | % | 9.91 | % | 0.00 | % | ||||||||||
Allowance for loan losses | (7.00 | )% | 18.00 | % | 3.09 | % | 3.47 | % | 0.00 | % | ||||||||||
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2005 | 2004 | 2003 | 2002 | 2001 | ||||||||||||||||
(in thousands, except per share data, ratios and percentages) | ||||||||||||||||||||
Capital Ratios: | ||||||||||||||||||||
Leverage (4) | 9.9 | % | 9.7 | % | 9.7 | % | 11.1 | % | 11.6 | % | ||||||||||
Tier 1 risk-based capital | 11.7 | % | 11.7 | % | 11.8 | % | 12.7 | % | 10.1 | % | ||||||||||
Total risk-based capital | 12.6 | % | 12.7 | % | 12.8 | % | 13.8 | % | 11.2 | % |
(1) | Net interest margin is the result of net interest income for the period divided by average interest earning assets. | |
(2) | Net interest spread is the result of the difference between the interest yield earned on interest earning assets less the interest paid on interest bearing liabilities. | |
(3) | Efficiency ratio is the result of noninterest expense divided by the sum of net interest income and noninterest income. | |
(4) | Leverage ratio is computed by dividing Tier 1 capital by average total assets for the fourth quarter of each year. |
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Years ended | 2005-2004 | Year ended | 2004-2003 | |||||||||||||||||
December 31, | Percent | Dec. 31, | Percent | |||||||||||||||||
2005 | 2004 | Increase | 2003 | Increase | ||||||||||||||||
Interest income | $ | 46,308 | $ | 27,679 | 67.3 | % | $ | 18,262 | 51.6 | % | ||||||||||
Interest expense | 17,270 | 7,415 | 132.9 | % | 5,363 | 38.3 | % | |||||||||||||
Net interest income | 29,038 | 20,264 | 43.3 | % | 12,899 | 57.1 | % | |||||||||||||
Provision for loan losses | 2,152 | 2,948 | -27.0 | % | 1,157 | 154.8 | % | |||||||||||||
Net interest income after provision for loan losses | 26,886 | 17,316 | 55.3 | % | 11,742 | 47.5 | % | |||||||||||||
Noninterest income | 5,394 | 4,978 | 8.4 | % | 3,035 | 64.0 | % | |||||||||||||
Noninterest expense | 21,032 | 14,803 | 42.1 | % | 10,796 | 37.1 | % | |||||||||||||
Net income before income taxes | 11,248 | 7,491 | 50.2 | % | 3,981 | 88.2 | % | |||||||||||||
Income tax expense | 3,193 | 2,172 | 47.0 | % | 1,426 | 52.3 | % | |||||||||||||
Net income | $ | 8,055 | $ | 5,319 | 51.4 | % | $ | 2,555 | 108.2 | % | ||||||||||
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2005 | 2004 | 2003 | ||||||||||||||||||||||||||||||||||
Average | Rates/ | Average | Rates/ | Average | Rates/ | |||||||||||||||||||||||||||||||
Balances | Interest | Yields | Balances | Interest | Yields | Balances | Interest | Yields | ||||||||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||||||||||||||
Loans(1) | $ | 562,061 | $ | 35,167 | 6.26 | % | $ | 373,287 | $ | 19,910 | 5.34 | % | $ | 254,550 | $ | 13,709 | 5.39 | % | ||||||||||||||||||
Securities: | ||||||||||||||||||||||||||||||||||||
Taxable | 204,532 | 9,086 | 4.44 | % | 162,712 | 6,936 | 4.26 | % | 100,547 | 4,158 | 4.14 | % | ||||||||||||||||||||||||
Tax-exempt(2) | 31,578 | 1,116 | 4.66 | % | 13,899 | 491 | 4.55 | % | 6,172 | 217 | 4.37 | % | ||||||||||||||||||||||||
Federal funds sold | 20,714 | 682 | 3.29 | % | 14,716 | 182 | 1.23 | % | 6,410 | 60 | 0.94 | % | ||||||||||||||||||||||||
Other | 3,827 | 257 | 7.69 | % | 2,894 | 160 | 6.26 | % | 2,174 | 118 | 6.06 | % | ||||||||||||||||||||||||
Total interest-earning assets | 822,712 | 46,308 | 5.68 | % | 567,508 | 27,679 | 4.91 | % | 369,853 | 18,262 | 4.96 | % | ||||||||||||||||||||||||
Nonearning assets | 47,322 | 29,872 | 18,231 | |||||||||||||||||||||||||||||||||
Total assets | $ | 870,034 | $ | 597,380 | $ | 388,084 | ||||||||||||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||||||||||||||
Interest-bearing deposits: | ||||||||||||||||||||||||||||||||||||
Interest checking | $ | 65,119 | $ | 659 | 1.01 | % | $ | 38,544 | $ | 191 | 0.50 | % | $ | 19,324 | $ | 95 | 0.49 | % | ||||||||||||||||||
Savings and money market | 250,136 | 4,860 | 1.94 | % | 173,318 | 1,520 | 0.88 | % | 100,032 | 870 | 0.87 | % | ||||||||||||||||||||||||
Certificates of deposit | 256,056 | 8,171 | 3.19 | % | 182,221 | 4,118 | 2.26 | % | 136,203 | 3,384 | 2.48 | % | ||||||||||||||||||||||||
Total deposits | 571,311 | 13,690 | 2.40 | % | 394,083 | 5,829 | 1.48 | % | 255,559 | 4,349 | 1.70 | % | ||||||||||||||||||||||||
Securities sold under agreements to repurchase | 54,811 | 1,315 | 2.40 | % | 20,466 | 104 | 0.51 | % | 14,496 | 66 | 0.45 | % | ||||||||||||||||||||||||
Federal funds purchased | 1,607 | 57 | 3.51 | % | 1,705 | 24 | 1.43 | % | 2,926 | 44 | 1.51 | % | ||||||||||||||||||||||||
Federal Home Loan Bank advances | 42,326 | 1,222 | 2.89 | % | 46,284 | 1,027 | 2.22 | % | 38,000 | 904 | 2.38 | % | ||||||||||||||||||||||||
Subordinated debt | 16,361 | 986 | 6.02 | % | 10,310 | 431 | 4.18 | % | — | — | — | |||||||||||||||||||||||||
Total interest-bearing liabilities | 686,416 | 17,270 | 2.52 | % | 472,848 | 7,415 | 1.57 | % | 310,981 | 5,363 | 1.72 | % | ||||||||||||||||||||||||
Noninterest-bearing deposits | 120,007 | — | — | 78,616 | — | — | 42,308 | — | — | |||||||||||||||||||||||||||
Total deposits and interest-bearing liabilities | 806,423 | 17,270 | 2.14 | % | 551,464 | 7,415 | 1.34 | % | 353,289 | 5,363 | 1.52 | % | ||||||||||||||||||||||||
Other liabilities | 2,730 | 2,707 | 1,635 | |||||||||||||||||||||||||||||||||
Stockholders’ equity | 60,881 | 43,209 | 33,160 | |||||||||||||||||||||||||||||||||
$ | 870,034 | $ | 597,380 | $ | 388,084 | |||||||||||||||||||||||||||||||
Net interest income | $ | 29,038 | $ | 20,264 | $ | 12,899 | ||||||||||||||||||||||||||||||
Net interest spread(3) | 3.16 | % | 3.34 | % | 3.24 | % | ||||||||||||||||||||||||||||||
Net interest margin | 3.60 | % | 3.62 | % | 3.53 | % |
(1) | Average balances of nonperforming loans are included in the above amounts. | |
(2) | Yields based on the carrying value of those tax exempt instruments are shown on a fully tax equivalent basis. | |
(3) | The net interest spread calculation excludes the impact of demand deposits. Had the impact of demand deposits been included the net interest spread for the year ended December 31, 2005 would have been 3.54% compared to a net interest spread for the years ended December 31, 2004 and 2003 of 3.56% and 3.44%, respectively. |
• | Our loan yields increased between 2005 and 2004 by 92 basis points. The pricing of a large portion of our loan portfolio is tied to our prime rate. Our weighted average prime rate for 2003 was 4.10% compared to 4.40% in 2004 and 6.25% in 2005. The rates for 2005 were higher due to periodic increases in our prime lending rate. | ||
• | We have been able to grow our funding base significantly. For asset/liability management purposes in 2005, we elected to allocate a greater proportion of such funds to our loan portfolio versus our securities and shorter-term investment portfolio than in 2004. For 2005, average loan balances were 65% of total assets compared to 62% in 2004. Loans generally have higher yields than do securities and other shorter-term investments. This change in allocation contributed to the increase in the overall total interest earning asset yields between 2005 and 2004. | ||
• | During 2005, overall deposit rates were higher than those rates for the comparable period in 2004. Changes in interest rates paid on such products as interest checking, savings and money market accounts, securities sold under agreements to repurchase and Federal funds purchased will generally increase or decrease in a manner that is consistent with changes in the short-term rate environment. During 2005, as was the case |
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with our prime lending rate, short-term rates were higher than in 2004. We also monitor the pricing of similar products by our primary competitors. The changes in the short-term rate environment and the pricing of our primary competitors required us to increase these rates in 2005 compared to the same period in 2004 which resulted in increased pressure on our net interest margin. | |||
• | During 2005, the average balances of noninterest bearing deposit balances, interest bearing transaction accounts, savings and money market accounts and securities sold under agreements to repurchase amounted to 61% of our total funding compared to 56% in 2004. These funding sources generally have lower rates than do other funding sources, such as certificates of deposit and other borrowings. As a result, the average rates on fundings for 2005 were lower than they would have been otherwise due to this change in funding mix. | ||
• | Similarly, the short- and long-term rate environment impacts rates paid on certificates of deposit and advances from the FHLB; however, these items are also impacted by our decisions to alter the mix of maturities of the underlying accounts within these items. Furthermore, the timing of the initial sale of the certificate of deposit or the funding of the FHLB advance also impacts the rates paid on these items. Our results were impacted by certificates of deposit and advances from the FHLB that had been acquired during periods of lower interest rates. Such items matured during the period between 2005 and 2004, and were replaced by certificates of deposit and advances from the FHLB which had higher interest rates. These matters contributed to the increase in the rates paid on certificates of deposit and advances from the FHLB between the two periods. | ||
• | Also impacting the net interest margin during 2005 compared to 2004 was pricing of our floating rate subordinated indebtedness and the incurrence of additional fixed rate subordinated indebtedness. The interest rate charged on this indebtedness is generally higher than other funding sources. The rate charged on the floating rate portion of the indebtedness is determined in relation to the three-month LIBOR index and reprices quarterly. During 2005, the short-term interest rate environment was higher than during 2004, and, as a result, the pricing for this funding source was higher in 2005 than in 2004. Additionally, in September 2005, we issued an additional $20 million in fixed rate subordinated indebtedness at a rate of 5.848% for the first five years with a floating rate determined in relation to three-month LIBOR thereafter. |
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2005 Compared to 2004 | 2004 Compared to 2003 | |||||||||||||||||||||||
Increase (decrease) due to | Increase (decrease) due to | |||||||||||||||||||||||
Rate | Volume | Net | Rate | Volume | Net | |||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
Loans | $ | 3,891 | $ | 11,366 | $ | 15,257 | $ | (137 | ) | $ | 6,338 | $ | 6,201 | |||||||||||
Securities: | ||||||||||||||||||||||||
Taxable | 303 | 1,847 | 2,150 | 132 | 2,646 | 2,778 | ||||||||||||||||||
Tax-exempt | 40 | 585 | 625 | — | 274 | 274 | ||||||||||||||||||
Federal funds sold | 407 | 93 | 500 | 23 | 99 | 122 | ||||||||||||||||||
Other | 44 | 53 | 97 | 4 | 38 | 42 | ||||||||||||||||||
Total interest-earning assets | 4,685 | 13,944 | 18,629 | 22 | 9,395 | 9,417 | ||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
Interest-bearing deposits: | ||||||||||||||||||||||||
Interest checking | $ | 282 | $ | 186 | $ | 468 | $ | 1 | $ | 95 | $ | 96 | ||||||||||||
Savings and money market | 2,447 | 893 | 3,340 | 12 | 638 | 650 | ||||||||||||||||||
Certificates of deposit | 2,044 | 2,009 | 4,053 | (327 | ) | 1,061 | 734 | |||||||||||||||||
Total deposits | 4,773 | 3,088 | 7,861 | (314 | ) | 1,794 | 1,480 | |||||||||||||||||
Securities sold under agreements to repurchase | 834 | 377 | 1,211 | 9 | 29 | 38 | ||||||||||||||||||
Federal funds purchased | 34 | (1 | ) | 33 | (2 | ) | (18 | ) | (20 | ) | ||||||||||||||
Federal Home Loan Bank advances | 288 | (93 | ) | 195 | (66 | ) | 189 | 123 | ||||||||||||||||
Subordinated debt | 239 | 316 | 555 | — | 431 | 431 | ||||||||||||||||||
Total interest-bearing liabilities | 6,168 | 3,687 | 9,855 | (373 | ) | 2,425 | 2,052 | |||||||||||||||||
Net interest income | $ | (1,483 | ) | $ | 10,257 | $ | 8,774 | $ | 395 | $ | 6,970 | $ | 7,365 | |||||||||||
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Years ended | 2005-2004 | Year ended | 2004-2003 | |||||||||||||||||
December 31, | Percent | Dec. 31, | Percent | |||||||||||||||||
2005 | 2004 | Increase | 2003 | Increase | ||||||||||||||||
Noninterest income: | ||||||||||||||||||||
Service charges on deposit accounts | $ | 978 | $ | 956 | 2.3 | % | $ | 513 | 86.4 | % | ||||||||||
Investment services | 1,836 | 1,657 | 10.8 | % | 998 | 66.0 | % | |||||||||||||
Gains on sales of loans and loan participations, net: | ||||||||||||||||||||
Fees from the origination and sale of mortgage loans, net of sales commissions | 1,096 | 760 | 44.2 | % | 415 | 83.1 | % | |||||||||||||
Gains on loans and loan participations sold, net | 152 | 514 | -70.4 | % | 334 | 53.9 | % | |||||||||||||
Gain on sale of investment securities, net | 114 | 357 | -68.1 | % | 248 | 44.0 | % | |||||||||||||
Other noninterest income: | ||||||||||||||||||||
Letters of credit fees | 527 | 272 | 93.8 | % | 186 | 46.2 | % | |||||||||||||
Bank-owned life insurance | 74 | 78 | -5.1 | % | 90 | -13.3 | % | |||||||||||||
Equity in earnings of Collateral Plus, LLC | 216 | 9 | 2300.0 | % | — | — | ||||||||||||||
Other noninterest income | 401 | 375 | 6.9 | % | 251 | 49.4 | % | |||||||||||||
Total noninterest income | $ | 5,394 | $ | 4,978 | 8.4 | % | $ | 3,035 | 64.0 | % | ||||||||||
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Years ended | 2005-2004 | Year ended | 2004-2003 | |||||||||||||||||
December 31, | Percent | Dec. 31, | Percent | |||||||||||||||||
2005 | 2004 | Increase | 2003 | Increase | ||||||||||||||||
Noninterest expense: | ||||||||||||||||||||
Salaries and employee benefits: | ||||||||||||||||||||
Salaries | $ | 8,565 | $ | 5,942 | 44.1 | % | $ | 4,474 | 32.8 | % | ||||||||||
Commissions | 714 | 610 | 17.0 | % | 420 | 45.2 | % | |||||||||||||
Other compensation, primarily incentives | 2,346 | 1,375 | 70.6 | % | 1,318 | 4.3 | % | |||||||||||||
Employee benefits and other | 1,506 | 1,119 | 34.6 | % | 796 | 40.6 | % | |||||||||||||
Total salaries and employee benefits | 13,131 | 9,046 | 45.2 | % | 7,008 | 29.1 | % | |||||||||||||
Equipment and occupancy | 3,767 | 2,406 | 56.6 | % | 1,827 | 31.7 | % | |||||||||||||
Marketing and business development | 698 | 607 | 15.0 | % | 387 | 56.8 | % | |||||||||||||
Postage and supplies | 618 | 492 | 25.6 | % | 348 | 41.4 | % | |||||||||||||
Other noninterest expense: | ||||||||||||||||||||
Accounting and auditing | 646 | 540 | 19.6 | % | 173 | 212.1 | % | |||||||||||||
Consultants, including independent loan review | 123 | 182 | -32.4 | % | 88 | 106.8 | % | |||||||||||||
Legal, including borrower-related charges | 245 | 280 | -12.5 | % | 190 | 47.4 | % | |||||||||||||
OCC exam fees | 182 | 131 | 38.9 | % | 94 | 39.4 | % | |||||||||||||
Directors’ fees | 229 | 138 | 65.9 | % | 102 | 35.3 | % | |||||||||||||
Insurance, including FDIC assessments | 322 | 256 | 25.8 | % | 119 | 115.1 | % | |||||||||||||
Other noninterest expense | 1,071 | 725 | 47.7 | % | 460 | 57.6 | % | |||||||||||||
Total noninterest expense | 2,818 | 2,252 | 25.1 | % | 1,226 | 83.7 | % | |||||||||||||
Total noninterest expense | $ | 21,032 | $ | 14,803 | 42.1 | % | $ | 10,796 | 37.1 | % | ||||||||||
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At December 31, | ||||||||||||||||||||||||||||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | ||||||||||||||||||||||||||||||||||||
Amount | Percent | Balances | Percent | Balances | Percent | Balances | Percent | Balances | Percent | |||||||||||||||||||||||||||||||
Commercial real estate — Mortgage | $ | 148,102 | 22.9 | % | $ | 117,123 | 24.8 | % | $ | 68,507 | 23.1 | % | $ | 58,965 | 28.1 | % | $ | 36,179 | 26.9 | % | ||||||||||||||||||||
Commercial real estate — Construction | 30,295 | 4.7 | % | 8,428 | 1.8 | % | 8,211 | 2.8 | % | 5,397 | 2.6 | % | 5,977 | 4.4 | % | |||||||||||||||||||||||||
Commercial — Other | 239,129 | 36.9 | % | 189,456 | 40.1 | % | 129,882 | 43.7 | % | 98,722 | 47.1 | % | 59,839 | 44.5 | % | |||||||||||||||||||||||||
Total commercial | 417,526 | 64.4 | % | 315,007 | 66.7 | % | 206,600 | 69.6 | % | 163,084 | 77.8 | % | 101,995 | 75.9 | % | |||||||||||||||||||||||||
Consumer real estate — Mortgage | 169,953 | 26.2 | % | 126,907 | 26.9 | % | 76,042 | 25.6 | % | 37,533 | 17.9 | % | 26,535 | 19.7 | % | |||||||||||||||||||||||||
Consumer real estate — Construction | 37,372 | 5.8 | % | 14,991 | 3.2 | % | 3,077 | 1.0 | % | 1,971 | 0.9 | % | 381 | 0.3 | % | |||||||||||||||||||||||||
Consumer — Other | 23,173 | 3.6 | % | 15,457 | 3.3 | % | 11,285 | 3.8 | % | 7,155 | 3.4 | % | 5,529 | 4.1 | % | |||||||||||||||||||||||||
Total consumer | 230,498 | 35.6 | % | 157,355 | 33.3 | % | 90,404 | 30.4 | % | 46,659 | 22.2 | % | 32,445 | 24.1 | % | |||||||||||||||||||||||||
Total loans | $ | 648,024 | 100.0 | % | $ | 472,362 | 100.0 | % | $ | 297,004 | 100.0 | % | $ | 209,743 | 100.0 | % | $ | 134,440 | 100.0 | % | ||||||||||||||||||||
Amounts at December 31, 2005 | Percentages to total loans | |||||||||||||||||||
Fixed | Variable | at December 31, | ||||||||||||||||||
Rates | Rates | Totals | 2005 | 2004 | ||||||||||||||||
Based on contractual maturity: | ||||||||||||||||||||
Due within one year | $ | 17,419 | $ | 206,196 | $ | 223,615 | 34.5 | % | 31.4 | % | ||||||||||
Due in one year to five years | 147,730 | 107,905 | 255,635 | 39.4 | % | 40.8 | % | |||||||||||||
Due after five years | 40,759 | 128,015 | 168,774 | 26.0 | % | 27.8 | % | |||||||||||||
Totals | $ | 205,908 | $ | 442,116 | $ | 648,024 | 100.0 | % | 100.0 | % | ||||||||||
Based on contractual repricing dates: | ||||||||||||||||||||
Daily floating rate | $ | — | $ | 346,784 | $ | 346,784 | 53.5 | % | 56.0 | % | ||||||||||
Due within one year | 17,419 | 44,853 | 62,272 | 9.6 | % | 9.1 | % | |||||||||||||
Due in one year to five years | 147,730 | 38,634 | 186,364 | 28.8 | % | 28.8 | % | |||||||||||||
Due after five years | 40,759 | 11,845 | 52,604 | 8.1 | % | 6.1 | % | |||||||||||||
Totals | $ | 205,908 | $ | 442,116 | $ | 648,024 | 100.0 | % | 100.0 | % | ||||||||||
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At December 31, | ||||||||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | ||||||||||||||||
Nonaccrual loans (1) | $ | 460 | $ | 561 | $ | 379 | $ | 1,845 | $ | 250 | ||||||||||
Restructured loans | — | — | — | — | — | |||||||||||||||
Other real estate owned | — | — | — | — | — | |||||||||||||||
Total nonperforming assets | 460 | 561 | 379 | 1,845 | 250 | |||||||||||||||
Accruing loans past due 90 days or more | — | 146 | 182 | 22 | — | |||||||||||||||
Total nonperforming assets and accruing loans past due 90 days or more | $ | 460 | $ | 707 | $ | 561 | $ | 1,867 | $ | 250 | ||||||||||
Total loans outstanding | $ | 648,024 | $ | 472,362 | $ | 297,004 | $ | 209,743 | $ | 134,440 | ||||||||||
Ratio of nonperforming assets and accruing loans past due 90 days or more to total loans outstanding at end of period | 0.07 | % | 0.15 | % | 0.19 | % | 0.89 | % | 0.19 | % | ||||||||||
Ratio of nonperforming assets and accruing loans past due 90 days or more to total allowance for loan losses at end of period | 5.85 | % | 12.51 | % | 15.08 | % | 69.74 | % | 13.65 | % | ||||||||||
(1) | Interest income that would have been recorded in 2005 related to nonaccrual loans was $21,000 compared to $41,000 for the year ended December 31, 2004 and $75,000 for the year ended December 31, 2003, none of which is included in interest income or net income for the applicable periods. |
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At December 31, | ||||||||||||||||||||||||||||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | ||||||||||||||||||||||||||||||||||||
Amount | Percent | Balances | Percent | Balances | Percent | Balances | Percent | Balances | Percent | |||||||||||||||||||||||||||||||
Commercial real estate — Mortgage | $ | 1,488 | 22.9 | % | $ | 1,205 | 24.8 | % | $ | 723 | 23.1 | % | $ | 508 | 28.1 | % | $ | 354 | 26.9 | % | ||||||||||||||||||||
Commercial real estate — Construction | 630 | 4.7 | % | 188 | 1.8 | % | 103 | 2.8 | % | 59 | 2.6 | % | 191 | 4.4 | % | |||||||||||||||||||||||||
Commercial — Other | 2,305 | 36.9 | % | 1,711 | 40.1 | % | 1,236 | 43.7 | % | 977 | 47.1 | % | 509 | 44.5 | % | |||||||||||||||||||||||||
Total commercial | 4,423 | 64.4 | % | 3,104 | 66.7 | % | 2,062 | 69.6 | % | 1,544 | 77.8 | % | 1,054 | 75.9 | % | |||||||||||||||||||||||||
Consumer real estate — Mortgage | 1,286 | 26.2 | % | 869 | 26.9 | % | 607 | 25.6 | % | 392 | 17.9 | % | 109 | 19.7 | % | |||||||||||||||||||||||||
Consumer real estate — Construction | 60 | 5.8 | % | 39 | 3.2 | % | 10 | 1.0 | % | 13 | 0.9 | % | 11 | 0.3 | % | |||||||||||||||||||||||||
Consumer — Other | 552 | 3.6 | % | 396 | 3.3 | % | 320 | 3.8 | % | 193 | 3.4 | % | 201 | 4.1 | % | |||||||||||||||||||||||||
Total consumer | 1,898 | 35.6 | % | 1,304 | 33.3 | % | 937 | 30.4 | % | 598 | 22.2 | % | 321 | 24.1 | % | |||||||||||||||||||||||||
Unallocated | 1,537 | NA | 1,242 | NA | 720 | NA | 535 | NA | 457 | NA | ||||||||||||||||||||||||||||||
Total allowance for loan losses | $ | 7,858 | 100.0 | % | $ | 5,650 | 100.0 | % | $ | 3,719 | 100.0 | % | $ | 2,677 | 100.0 | % | $ | 1,832 | 100.0 | % | ||||||||||||||||||||
For the year ended December 31, | ||||||||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | ||||||||||||||||
Balance at beginning of period | $ | 5,650 | $ | 3,719 | $ | 2,677 | $ | 1,832 | $ | 162 | ||||||||||
Provision for loan losses | 2,152 | 2,948 | 1,157 | 938 | 1,670 | |||||||||||||||
Charged-off loans: | ||||||||||||||||||||
Commercial real estate — Mortgage | — | — | — | — | — | |||||||||||||||
Commercial real estate — Construction | — | — | — | (91 | ) | — | ||||||||||||||
Commercial — Other | (61 | ) | (50 | ) | — | — | — | |||||||||||||
Consumer real estate — Mortgage | (38 | ) | (834 | ) | (123 | ) | — | — | ||||||||||||
Consumer real estate — Construction | — | — | — | — | — | |||||||||||||||
Consumer — Other | (109 | ) | (148 | ) | (44 | ) | (2 | ) | — | |||||||||||
Total charged-off loans | (208 | ) | (1,032 | ) | (167 | ) | (93 | ) | — | |||||||||||
Recoveries of previously charged-off loans: | ||||||||||||||||||||
Commercial real estate — Mortgage | — | — | — | — | — | |||||||||||||||
Commercial real estate — Construction | — | 2 | 49 | — | — | |||||||||||||||
Commercial — Other | 3 | — | — | — | — | |||||||||||||||
Consumer real estate — Mortgage | 231 | — | — | — | — | |||||||||||||||
Consumer real estate — Construction | — | — | — | — | — | |||||||||||||||
Consumer — Other | 30 | 13 | 3 | — | — | |||||||||||||||
Total recoveries of previously charged-off loans | 264 | 15 | 52 | — | — | |||||||||||||||
Net (charge-offs) recoveries | 56 | (1,017 | ) | (115 | ) | (93 | ) | — | ||||||||||||
Balance at end of period | $ | 7,858 | $ | 5,650 | $ | 3,719 | $ | 2,677 | $ | 1,832 | ||||||||||
Ratio of allowance for loan losses to total loans outstanding at end of period | 1.21 | % | 1.20 | % | 1.25 | % | 1.28 | % | 1.36 | % | ||||||||||
Ratio of net charge-offs (recoveries) to average loans outstanding for the period | (0.01 | )% | 0.27 | % | 0.05 | % | 0.05 | % | — | |||||||||||
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At December 31, | ||||||||||||||||||||||||||||||||||||||||
U.S. Treasury | U.S. government | State and Municipal | Corporate | |||||||||||||||||||||||||||||||||||||
securities | agency securities | securities | securities | Totals | ||||||||||||||||||||||||||||||||||||
Amount | Yield | Balances | Percent | Balances | Percent | Balances | Percent | Balances | Percent | |||||||||||||||||||||||||||||||
At December 31, 2005: | ||||||||||||||||||||||||||||||||||||||||
Securities available-for-sale: | ||||||||||||||||||||||||||||||||||||||||
Due in one year or less | $ | — | — | % | $ | — | — | % | $ | — | — | % | $ | 404 | 3.3 | % | $ | 404 | 3.3 | % | ||||||||||||||||||||
Due in one year to five years | — | — | % | 16,205 | 4.3 | % | 5,105 | 4.5 | % | 1,802 | 3.4 | % | 23,112 | 4.3 | % | |||||||||||||||||||||||||
Due in five years to ten years | — | — | % | 14,315 | 5.1 | % | 19,787 | 5.2 | % | — | — | % | 34,102 | 5.2 | % | |||||||||||||||||||||||||
Due after ten years | — | — | % | — | — | % | 7,245 | 5.5 | % | — | — | % | 7,245 | 5.5 | % | |||||||||||||||||||||||||
$ | — | — | % | $ | 30,520 | 4.7 | % | $ | 32,137 | 5.2 | % | $ | 2,206 | 3.4 | % | $ | 64,863 | 4.9 | % | |||||||||||||||||||||
Securities held-to-maturity: | ||||||||||||||||||||||||||||||||||||||||
Due in one year or less | $ | — | — | % | $ | — | — | % | $ | — | — | % | $ | — | — | % | $ | — | — | % | ||||||||||||||||||||
Due in one year to five years | — | — | % | 15,750 | 4.2 | % | 4,010 | 5.0 | % | — | — | % | 19,760 | 4.4 | % | |||||||||||||||||||||||||
Due in five years to ten years | — | — | % | 1,997 | 5.0 | % | 5,574 | 5.0 | % | — | — | % | 7,571 | 5.0 | % | |||||||||||||||||||||||||
Due after ten years | — | — | % | — | — | % | — | — | % | — | — | % | — | — | % | |||||||||||||||||||||||||
$ | — | — | % | $ | 17,747 | 4.3 | % | $ | 9,584 | 5.0 | % | $ | — | — | % | $ | 27,331 | 4.5 | % | |||||||||||||||||||||
At December 31, 2004: | ||||||||||||||||||||||||||||||||||||||||
Securities available-for-sale: | ||||||||||||||||||||||||||||||||||||||||
Due in one year or less | $ | — | — | % | $ | — | — | % | $ | — | — | % | $ | — | — | % | $ | — | — | % | ||||||||||||||||||||
Due in one year to five years | — | — | % | 2,982 | 3.5 | % | — | — | % | 2,270 | 3.4 | % | 5,252 | 3.5 | % | |||||||||||||||||||||||||
Due in five years to ten years | — | — | % | 23,001 | 4.7 | % | 7,409 | 5.0 | % | — | — | % | 30,410 | 4.8 | % | |||||||||||||||||||||||||
Due after ten years | — | — | % | 1,291 | 5.5 | % | 5,094 | 5.4 | % | — | — | % | 6,385 | 5.4 | % | |||||||||||||||||||||||||
$ | — | — | % | $ | 27,274 | 4.6 | % | $ | 12,503 | 5.2 | % | $ | 2,270 | 3.4 | % | $ | 42,047 | 4.7 | % | |||||||||||||||||||||
Securities held-to-maturity: | ||||||||||||||||||||||||||||||||||||||||
Due in one year or less | $ | — | — | % | $ | — | — | % | $ | — | — | % | $ | — | — | % | $ | — | — | % | ||||||||||||||||||||
Due in one year to five years | — | — | % | 3,250 | 4.1 | % | 844 | 4.3 | % | — | — | % | 4,094 | 4.1 | % | |||||||||||||||||||||||||
Due in five years to ten years | — | — | % | 14,496 | 4.3 | % | 7,953 | 5.0 | % | — | — | % | 22,449 | 4.5 | % | |||||||||||||||||||||||||
Due after ten years | — | — | % | — | — | % | 1,053 | 5.3 | % | — | — | % | 1,053 | 5.3 | % | |||||||||||||||||||||||||
$ | — | — | % | $ | 17,746 | 4.3 | % | $ | 9,850 | 5.0 | % | $ | — | — | % | $ | 27,596 | 4.5 | % | |||||||||||||||||||||
At December 31, 2003: | ||||||||||||||||||||||||||||||||||||||||
Securities available-for-sale: | ||||||||||||||||||||||||||||||||||||||||
Due in one year or less | $ | — | — | % | $ | — | — | % | $ | — | — | % | $ | — | — | % | $ | — | — | % | ||||||||||||||||||||
Due in one year to five years | 4,036 | 4.0 | % | — | — | % | 2,005 | 4.8 | % | — | — | % | 6,041 | 4.3 | % | |||||||||||||||||||||||||
Due in five years to ten years | 2,316 | 4.3 | % | 20,920 | 4.4 | % | 7,221 | 5.0 | % | — | — | % | 30,457 | 4.5 | % | |||||||||||||||||||||||||
Due after ten years | — | — | % | — | — | % | 468 | 5.2 | % | — | — | % | 468 | 5.2 | % | |||||||||||||||||||||||||
$ | 6,352 | 4.1 | % | $ | 20,920 | 4.4 | % | $ | 9,694 | 5.0 | % | $ | — | — | % | $ | 36,966 | 4.5 | % | |||||||||||||||||||||
December 31, 2005 | December 31, 2004 | |||||||
Weighted average life | 4.81 years | 5.01 years | ||||||
Weighted average coupon | 5.24 | % | 5.18 | % | ||||
Tax equivalent yield | 4.74 | % | 4.46 | % | ||||
Modified duration (*) | 3.71 | % | 3.63 | % |
(*) | Modified duration represents an approximation of the change in value of a security for every 100 basis point increase or decrease in market interest rates. |
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At December 31, | ||||||||||||||||
2005 | Percent | 2004 | Percent | |||||||||||||
Core funding: | ||||||||||||||||
Noninterest-bearing deposit accounts | $ | 155,811 | 16.4 | % | $ | 114,318 | 17.2 | % | ||||||||
Interest-bearing demand accounts | 72,521 | 7.6 | % | 51,752 | 7.8 | % | ||||||||||
Savings and money market accounts | 304,162 | 32.1 | % | 199,058 | 29.9 | % | ||||||||||
Time deposit accounts less than $100,000 | 31,408 | 3.3 | % | 39,805 | 6.0 | % | ||||||||||
Total core funding | 563,902 | 59.5 | % | 404,933 | 60.8 | % | ||||||||||
Non-core funding: | ||||||||||||||||
Time deposit accounts greater than $100,000 | ||||||||||||||||
Public funds | 106,928 | 11.3 | % | 61,377 | 9.2 | % | ||||||||||
Brokered deposits | 55,360 | 5.8 | % | 43,431 | 6.5 | % | ||||||||||
Other time deposits | 83,961 | 8.9 | % | 60,986 | 9.2 | % | ||||||||||
Securities sold under agreements to repurchase | 65,834 | 6.9 | % | 31,928 | 4.8 | % | ||||||||||
Federal Home Loan Bank advances | 41,500 | 4.4 | % | 53,500 | 8.0 | % | ||||||||||
Subordinated debt | 30,929 | 3.3 | % | 10,310 | 1.5 | % | ||||||||||
Total non-core funding | 384,512 | 40.5 | % | 261,532 | 39.2 | % | ||||||||||
Totals | $ | 948,414 | 100.0 | % | $ | 666,465 | 100.0 | % | ||||||||
At December 31, 2005 | ||||
Three months or less | $ | 67,068 | ||
Over three but less than six months | 85,121 | |||
Over six but less than twelve months | 48,115 | |||
Over twelve months | 45,945 | |||
$ | 246,249 | |||
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Amount | Interest Rate | |||||||
January 27, 2006 | $ | 2,000 | 2.79 | |||||
March 10, 2006 | 3,000 | 1.97 | ||||||
March 30, 2006 | 13,000 | 4.33 | ||||||
March 31, 2006 | 4,000 | 2.10 | ||||||
April 17, 2006 | 2,000 | 2.64 | ||||||
April 28, 2006 | 1,500 | 2.52 | ||||||
September 29, 2006 | 4,000 | 2.39 | ||||||
January 26, 2007 | 2,000 | 3.24 | ||||||
December 29, 2008 | 10,000 | 4.97 | ||||||
Total | $ | 41,500 | ||||||
Weighted average interest rate | 3.64 | % | ||||||
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2005 | 2004 | 2003 | ||||||||||
Amounts outstanding at year-end: | ||||||||||||
Securities sold under agreements to repurchase | $ | 65,834 | $ | 31,928 | $ | 15,050 | ||||||
Federal Home Loan Bank advances | 29,500 | 25,000 | 29,000 | |||||||||
Weighted average interest rates at year-end: | ||||||||||||
Securities sold under agreements to repurchase | 3.16 | % | 0.90 | % | 0.42 | % | ||||||
Federal Home Loan Bank advances | 3.21 | % | 2.52 | % | 1.81 | % | ||||||
Maximum amount of borrowings at any month-end: | ||||||||||||
Securities sold under agreements to repurchase | $ | 69,767 | $ | 31,928 | $ | 22,682 | ||||||
Federal funds purchased | 18,702 | 10,000 | 9,007 | |||||||||
Federal Home Loan Bank advances | 35,500 | 31,000 | 32,000 | |||||||||
Average balances for the year: | ||||||||||||
Securities sold under agreements to repurchase | $ | 54,811 | $ | 20,466 | $ | 14,496 | ||||||
Federal funds purchased | 1,607 | 1,705 | 2,926 | |||||||||
Federal Home Loan Bank advances | 24,208 | 18,250 | 22,208 | |||||||||
Weighted average interest rates for the year: | ||||||||||||
Securities sold under agreements to repurchase | 2.40 | % | 0.51 | % | 0.45 | % | ||||||
Federal funds purchased | 3.51 | % | 1.43 | % | 1.51 | % | ||||||
Federal Home Loan Bank advances | 2.65 | % | 2.01 | % | 2.13 | % |
Next 12 | More than 60 | |||||||||||||||||||
months | 13-36 months | 37-60 months | months | Totals | ||||||||||||||||
Contractual obligations: | ||||||||||||||||||||
Certificates of deposit | $ | 224,279 | $ | 45,349 | $ | 8,029 | $ | — | $ | 277,657 | ||||||||||
Securities sold under agreements to repurchase | 65,834 | — | — | — | 65,834 | |||||||||||||||
Federal Home Loan Bank advances | 29,500 | 12,000 | — | — | 41,500 | |||||||||||||||
Subordinated debt | — | 10,310 | 20,619 | — | 30,929 | |||||||||||||||
Minimum operating lease commitments | 951 | 1,973 | 1,970 | 9,464 | 14,358 | |||||||||||||||
Totals | $ | 320,564 | $ | 69,632 | $ | 30,618 | $ | 9,464 | $ | 430,278 | ||||||||||
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Next 12 | More than 60 | |||||||||||||||||||
months | 13-36 months | 37-60 months | months | Totals | ||||||||||||||||
Unfunded commitments: | ||||||||||||||||||||
Lines of credit | $ | 141,322 | $ | 36,911 | $ | 14,346 | $ | 60,038 | $ | 252,617 | ||||||||||
Letters of credit | 50,655 | 4,309 | 2,586 | — | 57,550 | |||||||||||||||
Totals | $ | 191,977 | $ | 41,220 | $ | 16,932 | $ | 60,038 | $ | 310,167 | ||||||||||
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47 | ||||
48 | ||||
49 | ||||
Consolidated Financial Statements: | ||||
50 | ||||
51 | ||||
52 | ||||
53 | ||||
54 |
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Pinnacle Financial Partners, Inc.:
February 22, 2006
Page 48
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Pinnacle Financial Partners, Inc.:
February 22, 2006
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December 31, | ||||||||
2005 | 2004 | |||||||
ASSETS | ||||||||
Cash and noninterest-bearing due from banks | $ | 25,935,948 | $ | 15,243,796 | ||||
Interest-bearing due from banks | 839,960 | 379,047 | ||||||
Federal funds sold | 31,878,362 | 11,122,944 | ||||||
Cash and cash equivalents | 58,654,270 | 26,745,787 | ||||||
Securities available-for-sale, at fair value | 251,749,094 | 180,573,820 | ||||||
Securities held-to-maturity (fair value of $26,546,297 and $27,134,913 at December 31, 2005 and December 31, 2004, respectively) | 27,331,251 | 27,596,159 | ||||||
Mortgage loans held-for-sale | 4,874,323 | 1,634,900 | ||||||
Loans | 648,024,032 | 472,362,219 | ||||||
Less allowance for loan losses | (7,857,774 | ) | (5,650,014 | ) | ||||
Loans, net | 640,166,258 | 466,712,205 | ||||||
Premises and equipment, net | 12,915,595 | 11,130,671 | ||||||
Investments in unconsolidated subsidiaries and other entities | 6,622,645 | 4,234,876 | ||||||
Accrued interest receivable | 4,870,197 | 2,639,548 | ||||||
Other assets | 9,588,097 | 5,871,484 | ||||||
Total assets | $ | 1,016,771,730 | $ | 727,139,450 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Deposits: | ||||||||
Noninterest-bearing demand | $ | 155,811,214 | $ | 114,318,024 | ||||
Interest-bearing demand | 72,520,757 | 51,751,320 | ||||||
Savings and money market accounts | 304,161,625 | 199,058,240 | ||||||
Time | 277,657,129 | 205,599,425 | ||||||
Total deposits | 810,150,725 | 570,727,009 | ||||||
Securities sold under agreements to repurchase | 65,834,232 | 31,927,860 | ||||||
Federal Home Loan Bank advances | 41,500,000 | 53,500,000 | ||||||
Subordinated debt | 30,929,000 | 10,310,000 | ||||||
Accrued interest payable | 1,884,596 | 769,300 | ||||||
Other liabilities | 3,036,752 | 2,025,106 | ||||||
Total liabilities | 953,335,305 | 669,259,275 | ||||||
Stockholders’ equity: | ||||||||
Preferred stock, no par value; 10,000,000 shares authorized; no shares issued and outstanding | — | — | ||||||
Common stock, par value $1.00; 20,000,000 shares authorized; 8,426,551 issued and outstanding at December 31, 2005 and 8,389,232 issued and outstanding at December 31, 2004 | 8,426,551 | 8,389,232 | ||||||
Additional paid-in capital | 44,890,912 | 44,376,307 | ||||||
Unearned compensation | (169,689 | ) | (37,250 | ) | ||||
Retained earnings | 13,182,291 | 5,127,023 | ||||||
Accumulated other comprehensive income (loss), net | (2,893,640 | ) | 24,863 | |||||
Total stockholders’ equity | 63,436,425 | 57,880,175 | ||||||
Total liabilities and stockholders’ equity | $ | 1,016,771,730 | $ | 727,139,450 | ||||
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For the years ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Interest income: | ||||||||||||
Loans, including fees | $ | 35,166,671 | $ | 19,909,900 | $ | 13,709,159 | ||||||
Securities: | ||||||||||||
Taxable | 9,086,134 | 6,935,902 | 4,158,064 | |||||||||
Tax-exempt | 1,115,486 | 490,757 | 217,284 | |||||||||
Federal funds sold and other | 939,369 | 342,470 | 177,404 | |||||||||
Total interest income | 46,307,660 | 27,679,029 | 18,261,911 | |||||||||
Interest expense: | ||||||||||||
Deposits | 13,690,649 | 5,829,395 | 4,349,365 | |||||||||
Securities sold under agreements to repurchase | 1,315,122 | 104,085 | 65,716 | |||||||||
Federal funds purchased and other borrowings | 2,263,851 | 1,481,072 | 948,023 | |||||||||
Total interest expense | 17,269,622 | 7,414,552 | 5,363,104 | |||||||||
Net interest income | 29,038,038 | 20,264,477 | 12,898,807 | |||||||||
Provision for loan losses | 2,151,966 | 2,948,423 | 1,157,280 | |||||||||
Net interest income after provision for loan losses | 26,886,072 | 17,316,054 | 11,741,527 | |||||||||
Noninterest income: | ||||||||||||
Service charges on deposit accounts | 977,386 | 955,851 | 513,074 | |||||||||
Investment services | 1,835,757 | 1,656,743 | 998,119 | |||||||||
Gains on loans and loan participations sold | 1,247,898 | 1,274,331 | 748,801 | |||||||||
Gains on sales of investment securities, net | 114,410 | 357,196 | 247,978 | |||||||||
Other noninterest income | 1,218,123 | 734,449 | 527,207 | |||||||||
Total noninterest income | 5,393,574 | 4,978,570 | 3,035,179 | |||||||||
Noninterest expense: | ||||||||||||
Salaries and employee benefits | 13,130,779 | 9,046,490 | 7,008,681 | |||||||||
Equipment and occupancy | 3,766,593 | 2,405,613 | 1,827,260 | |||||||||
Marketing and other business development | 698,232 | 606,841 | 386,905 | |||||||||
Postage and supplies | 618,060 | 492,254 | 347,684 | |||||||||
Other noninterest expense | 2,818,352 | 2,252,233 | 1,225,791 | |||||||||
Total noninterest expense | 21,032,016 | 14,803,431 | 10,796,321 | |||||||||
Net income before income taxes | 11,247,630 | 7,491,193 | 3,980,385 | |||||||||
Income tax expense | 3,192,362 | 2,172,283 | 1,425,746 | |||||||||
Net income | $ | 8,055,268 | $ | 5,318,910 | $ | 2,554,639 | ||||||
Per share information: | ||||||||||||
Basic net income per common share | $ | 0.96 | $ | 0.69 | $ | 0.35 | ||||||
Diluted net income per common share | $ | 0.85 | $ | 0.61 | $ | 0.32 | ||||||
Weighted average common shares outstanding: | ||||||||||||
Basic | 8,408,663 | 7,750,943 | 7,384,106 | |||||||||
Diluted | 9,464,500 | 8,698,139 | 7,876,006 | |||||||||
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AND COMPREHENSIVE INCOME (LOSS)
Retained | Accumulated | |||||||||||||||||||||||||||
Additional | Earnings | Other | Total | |||||||||||||||||||||||||
Common Stock | Paid-in | Unearned | (Accumulated | Comprehensive | Stockholders’ | |||||||||||||||||||||||
Shares | Amount | Capital | Compensation | Deficit) | Income (Loss) | Equity | ||||||||||||||||||||||
Balances, December 31, 2002 | 7,384,106 | $ | 7,384,106 | $ | 26,990,894 | $ | — | $ | (2,743,794 | ) | $ | 772,441 | $ | 32,403,647 | ||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||
Net income | — | — | — | — | 2,554,639 | — | 2,554,639 | |||||||||||||||||||||
Net unrealized holding gains on available-for-sale securities, net of deferred tax benefit of $381,171 | — | — | — | — | — | (621,905 | ) | (621,905 | ) | |||||||||||||||||||
Total comprehensive income | 1,932,734 | |||||||||||||||||||||||||||
Balances, December 31, 2003 | 7,384,106 | $ | 7,384,106 | $ | 26,990,894 | $ | — | $ | (189,155 | ) | $ | 150,536 | $ | 34,336,381 | ||||||||||||||
Exercise of employee incentive common stock options | 23,780 | 23,780 | 94,333 | — | — | — | 118,113 | |||||||||||||||||||||
Proceeds from the sale of common stock (less offering expenses of $1,357,833) | 977,500 | 977,500 | 17,214,667 | — | — | — | 18,192,167 | |||||||||||||||||||||
Issuance of restricted common shares pursuant to 2004 Equity Incentive Plan | 3,846 | 3,846 | 76,413 | (80,259 | ) | — | — | — | ||||||||||||||||||||
Amortization of unearned compensation associated with restricted shares | — | — | — | 43,009 | — | — | 43,009 | |||||||||||||||||||||
Dividends paid to minority interest shareholders of PNFP Properties, Inc. | — | — | — | — | (2,732 | ) | — | (2,732 | ) | |||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||
Net income | — | — | — | — | 5,318,910 | — | 5,318,910 | |||||||||||||||||||||
Net unrealized holding losses on available-for-sale securities, net of deferred tax benefit of $77,023 | — | — | — | — | — | (125,673 | ) | (125,673 | ) | |||||||||||||||||||
Total comprehensive income | 5,193,237 | |||||||||||||||||||||||||||
Balances, December 31, 2004 | 8,389,232 | $ | 8,389,232 | $ | 44,376,307 | $ | (37,250 | ) | $ | 5,127,023 | $ | 24,863 | $ | 57,880,175 | ||||||||||||||
Exercise of employee incentive common stock options | 20,953 | 20,953 | 153,808 | — | — | — | 174,761 | |||||||||||||||||||||
Issuance of restricted common shares pursuant to 2004 Equity Incentive Plan | 16,366 | 16,366 | 360,797 | (377,163 | ) | — | — | — | ||||||||||||||||||||
Amortization of unearned compensation associated with restricted shares | — | — | — | 244,724 | — | — | 244,724 | |||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||
Net income | — | — | — | — | 8,055,268 | — | 8,055,268 | |||||||||||||||||||||
Net unrealized holding losses on available-for-sale securities, net of deferred tax benefit of $1,788,761 | — | — | — | — | — | (2,918,503 | ) | (2,918,503 | ) | |||||||||||||||||||
Total comprehensive income | 5,136,765 | |||||||||||||||||||||||||||
Balances, December 31, 2005 | 8,426,551 | $ | 8,426,551 | $ | 44,890,912 | $ | (169,689 | ) | $ | 13,182,291 | $ | (2,893,640 | ) | $ | 63,436,425 | |||||||||||||
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For the years ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Operating activities: | ||||||||||||
Net income | $ | 8,055,268 | $ | 5,318,910 | $ | 2,554,639 | ||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||||||
Net amortization of premiums on securities | 1,130,766 | 1,050,687 | 858,412 | |||||||||
Depreciation and amortization | 1,699,380 | 1,204,446 | 953,819 | |||||||||
Provision for loan losses | 2,151,966 | 2,948,423 | 1,157,280 | |||||||||
Gains on sales of investment securities, net | (114,410 | ) | (357,196 | ) | (247,978 | ) | ||||||
Gain on loan participations sold, net | (152,077 | ) | (233,646 | ) | (334,249 | ) | ||||||
Amortization of unearned compensation associated with restricted shares | 244,724 | 43,009 | — | |||||||||
Deferred tax expense (benefit) | (575,755 | ) | (922,286 | ) | 569,987 | |||||||
Mortgage loans held for sale: | ||||||||||||
Loans originated | (102,874,134 | ) | (69,020,758 | ) | (38,527,408 | ) | ||||||
Loans sold | 99,634,711 | 68,968,458 | 36,944,808 | |||||||||
Increase in other assets | (3,155,825 | ) | (1,397,226 | ) | (641,998 | ) | ||||||
Increase (decrease) in other liabilities | 2,126,942 | (860,749 | ) | 1,346,425 | ||||||||
Net cash provided by operating activities | 8,171,556 | 6,742,072 | 4,633,737 | |||||||||
Investing activities: | ||||||||||||
Activities in securities: | ||||||||||||
Purchases | (116,361,069 | ) | (132,755,709 | ) | (132,340,115 | ) | ||||||
Sales | 6,791,867 | 28,461,405 | 23,125,263 | |||||||||
Maturities, prepayments and calls | 32,935,215 | 35,172,378 | 41,637,158 | |||||||||
Increase in loans, net | (175,606,019 | ) | (176,375,116 | ) | (87,376,399 | ) | ||||||
Purchases of premises and equipment and software | (3,438,916 | ) | (5,144,869 | ) | (3,910,748 | ) | ||||||
Purchases of capital securities of unconsolidated subsidiaries | (619,000 | ) | — | (310,000 | ) | |||||||
Purchases of other assets | (2,089,000 | ) | (881,719 | ) | (929,500 | ) | ||||||
Net cash used in investing activities | (258,386,922 | ) | (251,523,630 | ) | (160,104,341 | ) | ||||||
Financing activities: | ||||||||||||
Net increase in deposits | 239,423,716 | 180,157,997 | 156,552,623 | |||||||||
Net increase (decrease) in repurchase agreements | 33,906,372 | 16,877,750 | (98 | ) | ||||||||
Advances from Federal Home Loan Bank: | ||||||||||||
Issuances | 62,000,000 | 48,000,000 | 34,500,000 | |||||||||
Payments | (74,000,000 | ) | (39,000,000 | ) | (11,500,000 | ) | ||||||
Proceeds from issuance of subordinated debt | 20,619,000 | — | 10,310,000 | |||||||||
Debt issuance costs related to issuance of subordinated debt | — | — | (150,000 | ) | ||||||||
Net proceeds from sale of common stock | — | 18,192,167 | — | |||||||||
Exercise of common stock options | 174,761 | 118,113 | — | |||||||||
Other | — | (2,732 | ) | — | ||||||||
Net cash provided by financing activities | 282,123,849 | 224,343,295 | 189,712,525 | |||||||||
Net increase (decrease) in cash and cash equivalents | 31,908,483 | (20,438,263 | ) | 34,241,921 | ||||||||
Cash and cash equivalents, beginning of period | 26,745,787 | 47,184,050 | 12,942,129 | |||||||||
Cash and cash equivalents, end of period | $ | 58,654,270 | $ | 26,745,787 | $ | 47,184,050 | ||||||
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• | PFP Title Company is a wholly-owned subsidiary of Pinnacle National. PFP Title Company is licensed to sell title insurance policies to Pinnacle National customers and others. | ||
• | PNFP Holdings, Inc. is a wholly-owned subsidiary of PFP Title Company and is the parent of PNFP Properties, Inc., which was established as a Real Estate Investment Trust pursuant to Internal Revenue Service regulations. | ||
• | Pinnacle Community Development, Inc. is a wholly-owned subsidiary of Pinnacle National and is certified as a Community Development Entity by the Community Development Financial Institutions Fund of the United States Department of the Treasury. | ||
• | PNFP Statutory Trust I and PNFP Statutory Trust II, wholly-owned subsidiaries of Pinnacle Financial, were created for the exclusive purpose of issuing capital trust preferred securities. | ||
• | Pinnacle Advisory Services, Inc. is a wholly-owned subsidiary of Pinnacle Financial and was established as a registered investment advisor pursuant to regulations promulgated by the Board of Governors of the Federal Reserve System. | ||
• | Pinnacle Credit Enhancement Holdings, Inc. is a wholly-owned subsidiary of Pinnacle Financial and was established to own a 24.5% membership interest in Collateral Plus, LLC. Collateral Plus, LLC serves as an intermediary between investors and borrowers in certain financial transactions whereby the borrowers require enhanced collateral in the form of letters of credit issued by the investors for the benefit of banks and other financial institutions. |
For the years ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Cash Payments: | ||||||||||||
Interest | $ | 16,154,326 | $ | 7,252,494 | $ | 5,341,687 | ||||||
Income taxes | 3,802,633 | 3,681,817 | — | |||||||||
Noncash Transactions: | ||||||||||||
Transfers of available-for-sale securities to held-to-maturity | — | 27,655,669 | — | |||||||||
Loans charged-off to the allowance for loan losses | 207,647 | 1,032,378 | 167,023 | |||||||||
Loans foreclosed upon with repossessions transferred to other assets | 34,750 | — | — |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2005 | 2004 | 2003 | ||||||||||
Basic earnings per share calculation: | ||||||||||||
Numerator– Net income | $ | 8,055,268 | $ | 5,318,910 | $ | 2,554,639 | ||||||
Denominator– Average common shares outstanding | 8,408,663 | 7,750,943 | 7,384,106 | |||||||||
Basic earnings per share | $ | 0.96 | $ | 0.69 | $ | 0.35 | ||||||
Diluted earnings per share calculation: | ||||||||||||
Numerator��� Net income | $ | 8,055,268 | $ | 5,318,910 | $ | 2,554,639 | ||||||
Denominator– Average common shares outstanding | 8,408,663 | 7,750,943 | 7,384,106 | |||||||||
Dilutive shares contingently issuable | 1,055,837 | 947,196 | 491,900 | |||||||||
Average dilutive common shares outstanding | 9,464,500 | 8,698,139 | 7,876,006 | |||||||||
Diluted earnings per share | $ | 0.85 | $ | 0.61 | $ | 0.32 |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2005 | 2004 | 2003 | ||||||||||
Net income, as reported | $ | 8,055,268 | $ | 5,318,910 | $ | 2,554,639 | ||||||
Add: Compensation expense recognized in the accompanying consolidated financial statements, net of related tax effects | 148,731 | 26,139 | — | |||||||||
Deduct: Total stock-based compensation expense determined under the fair value based method for all awards, net of related tax effects | (759,501 | ) | (436,586 | ) | (307,343 | ) | ||||||
Pro forma net income | $ | 7,444,498 | $ | 4,908,463 | $ | 2,247,296 | ||||||
Per share information: | ||||||||||||
Basic net income As reported | $ | 0.96 | $ | 0.69 | $ | 0.35 | ||||||
Pro forma | $ | 0.89 | $ | 0.63 | $ | 0.30 | ||||||
Diluted net income As reported | $ | 0.85 | $ | 0.61 | $ | 0.32 | ||||||
Pro forma | $ | 0.79 | $ | 0.56 | $ | 0.29 |
2005 | 2004 | 2003 | ||||||||||
Risk free interest rate | 2.57 | % | 1.11 | % | 1.19 | % | ||||||
Expected life of the options | 6.5 years | 6.5 years | 6.5 years | |||||||||
Expected dividend yield | 0.00 | % | 0.00 | % | 0.00 | % | ||||||
Expected volatility | 24.1 | % | 21.4 | % | 18.2 | % | ||||||
Weighted average fair value | $ | 7.30 | $ | 3.62 | $ | 1.65 |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005 | ||||||||||||||||
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
Securities available-for-sale: | ||||||||||||||||
U.S. Treasury securities | $ | — | $ | — | $ | — | $ | — | ||||||||
U.S. government agency securities | 31,054,469 | — | 534,899 | 30,519,570 | ||||||||||||
Mortgage-backed securities | 190,708,007 | 44,378 | 3,866,210 | 186,886,175 | ||||||||||||
State and municipal securities | 32,583,283 | 19,044 | 464,984 | 32,137,343 | ||||||||||||
Corporate notes | 2,300,442 | — | 94,436 | 2,206,006 | ||||||||||||
$ | 256,646,201 | $ | 63,422 | $ | 4,960,529 | $ | 251,749,094 | |||||||||
Securities held-to-maturity: | ||||||||||||||||
U.S. government agency securities | $ | 17,746,883 | $ | — | $ | 441,208 | $ | 17,305,675 | ||||||||
State and municipal securities | 9,584,368 | — | 343,746 | 9,240,622 | ||||||||||||
$ | 27,331,251 | $ | — | $ | 784,954 | $ | 26,546,297 | |||||||||
December 31, 2004 | ||||||||||||||||
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
Securities available-for-sale: | ||||||||||||||||
U.S. Treasury securities | $ | — | $ | — | $ | — | $ | — | ||||||||
U.S. government agency securities | 27,164,683 | 129,219 | 19,727 | 27,274,175 | ||||||||||||
Mortgage-backed securities | 138,851,236 | 348,187 | 672,189 | 138,527,234 | ||||||||||||
State and municipal securities | 12,486,440 | 71,726 | 55,481 | 12,502,685 | ||||||||||||
Corporate notes | 2,314,831 | — | 45,105 | 2,269,726 | ||||||||||||
$ | 180,817,190 | $ | 549,132 | $ | 792,502 | $ | 180,573,820 | |||||||||
Securities held-to-maturity: | ||||||||||||||||
U.S. government agency securities | $ | 17,746,555 | $ | 600 | $ | 298,605 | $ | 17,448,550 | ||||||||
State and municipal securities | 9,849,604 | — | 163,241 | 9,686,363 | ||||||||||||
$ | 27,596,159 | $ | 600 | $ | 461,846 | $ | 27,134,913 | |||||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Available-for-sale | Held-to-maturity | |||||||||||||||
Amortized | Fair | Amortized | Fair | |||||||||||||
Cost | Value | Cost | Value | |||||||||||||
Due in one year or less | $ | 411,923 | $ | 403,880 | $ | — | $ | — | ||||||||
Due in one year to five years | 23,633,257 | 23,111,526 | 19,759,888 | 19,350,684 | ||||||||||||
Due in five years to ten years | 34,509,448 | 34,101,957 | 7,571,363 | 7,195,613 | ||||||||||||
Due after ten years | 7,383,566 | 7,245,556 | — | — | ||||||||||||
Mortgage-backed securities | 190,708,007 | 186,886,175 | — | — | ||||||||||||
$ | 256,646,201 | $ | 251,749,094 | $ | 27,331,251 | $ | 26,546,297 | |||||||||
Investments With an | Investments With an | Total Investments at | ||||||||||||||||||||||
Unrealized Loss of | Unrealized Loss of | December 31, 2005 With | ||||||||||||||||||||||
Less than 12 months | 12 months or longer | an Unrealized Loss | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
Value | Losses | Value | Losses | Value | Losses | |||||||||||||||||||
At December 31, 2005: | ||||||||||||||||||||||||
U.S. government agency securities | $ | 28,605,270 | $ | 463,534 | $ | 19,219,975 | $ | 512,573 | $ | 47,825,245 | $ | 976,107 | ||||||||||||
Mortgage-backed securities | 110,636,351 | 1,586,394 | 69,512,865 | 2,279,816 | 180,149,216 | 3,866,210 | ||||||||||||||||||
State and municipal securities | 22,692,062 | 341,869 | 14,074,344 | 466,861 | 36,766,406 | 808,730 | ||||||||||||||||||
Corporate notes | — | — | 2,206,006 | 94,436 | 2,206,006 | 94,436 | ||||||||||||||||||
Total temporarily-impaired securities | $ | 161,933,683 | $ | 2,391,797 | $ | 105,013,190 | $ | 3,353,686 | $ | 266,946,873 | $ | 5,745,483 | ||||||||||||
At December 31, 2004: | ||||||||||||||||||||||||
U.S. government agency securities | $ | 21,426,876 | $ | 318,332 | $ | — | $ | — | $ | 21,426,876 | $ | 318,332 | ||||||||||||
Mortgage-backed securities | 78,476,825 | 450,064 | 9,852,117 | 222,125 | 88,328,942 | 672,189 | ||||||||||||||||||
State and municipal securities | 14,856,388 | 208,074 | 691,803 | 10,648 | 15,548,191 | 218,722 | ||||||||||||||||||
Corporate notes | 2,314,831 | 45,105 | — | — | 2,314,831 | 45,105 | ||||||||||||||||||
Total temporarily-impaired securities | $ | 117,074,920 | $ | 1,021,575 | $ | 10,543,920 | $ | 232,773 | $ | 127,618,840 | $ | 1,254,348 | ||||||||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2005 | 2004 | |||||||
Commercial real estate – Mortgage | $ | 148,102,053 | $ | 117,122,607 | ||||
Commercial real estate – Construction | 30,295,106 | 8,427,763 | ||||||
Commercial – Other | 239,128,969 | 189,456,385 | ||||||
Total Commercial | 417,526,128 | 315,006,755 | ||||||
Consumer real estate – Mortgage | 169,952,860 | 126,907,581 | ||||||
Consumer real estate – Construction | 37,371,834 | 14,990,739 | ||||||
Consumer – Other | 23,173,210 | 15,457,144 | ||||||
Total Consumer | 230,497,904 | 157,355,464 | ||||||
Total Loans | 648,024,032 | 472,362,219 | ||||||
Allowance for loan losses | (7,857,774 | ) | (5,650,014 | ) | ||||
Loans, net | $ | 640,166,258 | $ | 466,712,205 | ||||
2005 | 2004 | |||||||
Trucking industry | $ | 50,421,000 | $ | 43,107,000 | ||||
Operators of nonresidential buildings | 60,932,000 | 27,510,000 | ||||||
Land subdividers | 37,963,000 | 12,661,000 |
2005 | 2004 | 2003 | ||||||||||
Balance at beginning of period | $ | 5,650,014 | $ | 3,718,598 | $ | 2,677,043 | ||||||
Charged-off loans | (207,647 | ) | (1,032,378 | ) | (167,023 | ) | ||||||
Recovery of previously charged-off loans | 263,441 | 15,371 | 51,298 | |||||||||
Provision for loan losses | 2,151,966 | 2,948,423 | 1,157,280 | |||||||||
Balance at end of period | $ | 7,857,774 | $ | 5,650,014 | $ | 3,718,598 | ||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Range of | ||||||||||||
Useful Lives | 2005 | 2004 | ||||||||||
Land | — | $ | 2,502,524 | $ | 2,502,525 | |||||||
Buildings | 15 to 30 years | 6,767,518 | 5,220,088 | |||||||||
Leasehold improvements | 15 to 20 years | 1,232,973 | 810,266 | |||||||||
Furniture and equipment | 3 to 15 years | 5,506,469 | 4,694,769 | |||||||||
16,009,484 | 13,227,648 | |||||||||||
Accumulated depreciation | (3,093,889 | ) | (2,096,977 | ) | ||||||||
$ | 12,915,595 | $ | 11,130,671 | |||||||||
2006 | $ | 951,000 | ||
2007 | 973,000 | |||
2008 | 1,000,000 | |||
2009 | 1,024,000 | |||
2010 | 946,000 | |||
Thereafter | 9,464,000 | |||
$ | 14,358,000 | |||
2006 | $ | 224,279,128 | ||
2007 | 37,034,545 | |||
2008 | 8,313,873 | |||
2009 | 7,208,920 | |||
2010 | 820,663 | |||
$ | 277,657,129 | |||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Scheduled | Interest Rate | |||||||
Maturities | Ranges | |||||||
2006 | $ | 29,500,000 | 2.0% to 4.3% | |||||
2007 | 2,000,000 | 3.2% | ||||||
2008 | 10,000,000 | 5.0% | ||||||
$ | 41,500,000 | |||||||
Weighted average interest rate | 3.6% | |||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At December 31, | ||||||||
2005 | 2004 | |||||||
Asset– Investment in subordinated debentures issued by Pinnacle Financial | $ | 30,929 | $ | 10,310 | ||||
Liabilities | $ | — | $ | — | ||||
Stockholder’s equity– Trust preferred securities | 30,000 | 10,000 | ||||||
Common stock (100% owned by Pinnacle Financial) | 929 | 310 | ||||||
Total stockholder’s equity | 30,929 | 10,310 | ||||||
Total liabilities and stockholder’s equity | $ | 30,929 | $ | 10,310 | ||||
Year ended | ||||||||
December 31, | ||||||||
2005 | 2004 | |||||||
Income –Interest income from subordinated debentures issued by Pinnacle Financial | $ | 986 | $ | 431 | ||||
Net Income | $ | 986 | $ | 431 | ||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Trust | Total | |||||||||||||||
Preferred | Common | Retained | Stockholder’s | |||||||||||||
Securities | Stock | Earnings | Equity | |||||||||||||
Beginning balances, December 31, 2003 | $ | 10,000 | $ | 310 | $ | — | $ | 10,310 | ||||||||
Net income | — | — | 431 | 431 | ||||||||||||
Dividends: | ||||||||||||||||
Trust preferred securities | — | — | (418 | ) | (418 | ) | ||||||||||
Common paid to Pinnacle Financial | — | — | (13 | ) | (13 | ) | ||||||||||
Beginning balances, December 31, 2004 | $ | 10,000 | $ | 310 | $ | — | $ | 10,310 | ||||||||
Net income | — | — | 986 | 986 | ||||||||||||
Issuance of Trust II trust preferred securities | 20,000 | 619 | — | 20,619 | ||||||||||||
Dividends: | ||||||||||||||||
Trust preferred securities | — | — | (956 | ) | (956 | ) | ||||||||||
Common paid to Pinnacle Financial | — | — | (30 | ) | (30 | ) | ||||||||||
Ending balances, December 31, 2005 | $ | 30,000 | $ | 929 | $ | — | $ | 30,929 | ||||||||
2005 | 2004 | 2003 | ||||||||||
Current tax expense: | ||||||||||||
Federal | $ | 3,589,487 | $ | 2,677,582 | $ | 710,749 | ||||||
State | 178,630 | 416,987 | 145,010 | |||||||||
Total current tax expense | 3,768,117 | 3,094,569 | 855,759 | |||||||||
Deferred tax expense (benefit): | ||||||||||||
Federal | (479,072 | ) | (765,139 | ) | 473,038 | |||||||
State | (96,683 | ) | (157,147 | ) | 96,949 | |||||||
Total deferred tax expense (benefit) | (575,755 | ) | (922,286 | ) | 569,987 | |||||||
$ | 3,192,362 | $ | 2,172,283 | $ | 1,425,746 | |||||||
2005 | 2004 | 2003 | ||||||||||
Income taxes at statutory rate | $ | 3,824,194 | $ | 2,547,006 | $ | 1,353,331 | ||||||
State tax expense, net of federal tax effect | 54,085 | 171,494 | 159,693 | |||||||||
Federal tax credits | (300,000 | ) | (300,000 | ) | — | |||||||
Tax-exempt securities | (339,900 | ) | (156,354 | ) | (69,442 | ) | ||||||
Other items | (46,017 | ) | (89,863 | ) | (17,836 | ) | ||||||
Income tax expense (benefit) | $ | 3,192,362 | $ | 2,172,283 | $ | 1,425,746 | ||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2005 | 2004 | |||||||
Deferred tax assets: | ||||||||
Loan loss allowance | $ | 3,019,094 | $ | 2,162,332 | ||||
Securities | 1,773,521 | — | ||||||
Other assets | 174,816 | 136,790 | ||||||
4,967,431 | 2,299,122 | |||||||
Deferred tax liabilities: | ||||||||
Depreciation and amortization | 417,207 | 62,390 | ||||||
Securities | — | 15,240 | ||||||
Other accruals | 139,602 | 175,384 | ||||||
556,809 | 253,014 | |||||||
Net deferred tax assets | $ | 4,410,622 | $ | 2,046,108 | ||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Commitments to extend credit | $ | 252,617,000 | ||
Standby letters of credit | 57,550,000 |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Weighted- | ||||||||
Average | ||||||||
Exercise | ||||||||
Number | Price | |||||||
Outstanding at December 31, 2002 | 724,700 | $ | 4.84 | |||||
Granted | 185,800 | 7.55 | ||||||
Exercised | — | — | ||||||
Forfeited | (3,100 | ) | 5.73 | |||||
Outstanding at December 31, 2003 | 907,400 | $ | 5.39 | |||||
Granted | 189,080 | 14.65 | ||||||
Exercised | (23,780 | ) | 4.89 | |||||
Forfeited | (4,350 | ) | 7.86 | |||||
Outstanding at December 31, 2004 | 1,068,350 | $ | 7.03 | |||||
Granted | 209,482 | 23.74 | ||||||
Exercised | (20,953 | ) | 5.93 | |||||
Forfeited | (14,486 | ) | 14.93 | |||||
Outstanding at December 31, 2005 | 1,242,393 | $ | 9.78 | |||||
Number of | Remaining | �� | Weighted- | |||||||||||||
Remaining | Weighted-Average | Average | Number of | |||||||||||||
Grant date | Shares | Contractual | Exercise | Shares | ||||||||||||
by year | Outstanding | Life in Years | Price | Exercisable | ||||||||||||
2000 | 353,778 | 5.0 | $ | 5.00 | 353,778 | |||||||||||
2001 | 89,740 | 5.2 | 3.82 | 71,792 | ||||||||||||
2002 | 240,145 | 6.1 | 5.01 | 144,087 | ||||||||||||
2003 | 173,900 | 7.3 | 7.61 | 69,560 | ||||||||||||
2004 | 180,118 | 8.1 | 14.73 | 36,024 | ||||||||||||
2005 | 204,712 | 8.7 | 23.74 | — | ||||||||||||
1,242,393 | 6.7 | $ | 9.78 | 675,241 | ||||||||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005 | December 31, 2004 | |||||||||||||||
Carrying | Estimated | Carrying | Estimated | |||||||||||||
Amount | Fair Value | Amount | Fair Value | |||||||||||||
Financial assets: | ||||||||||||||||
Cash, due from banks, and Federal funds sold | $ | 58,654 | $ | 58,654 | $ | 26,746 | $ | 26,746 | ||||||||
Securities available-for-sale | 251,749 | 251,749 | 180,574 | 180,574 | ||||||||||||
Securities held-to-maturity | 27,331 | 26,546 | 27,596 | 27,135 | ||||||||||||
Mortgage loans held-for-sale | 4,874 | 4,874 | 1,635 | 1,635 | ||||||||||||
Loans, net | 640,166 | 630,586 | 466,712 | 467,290 | ||||||||||||
Financial liabilities: | ||||||||||||||||
Deposits and securities sold under agreements to repurchase | $ | 875,985 | $ | 873,635 | $ | 602,655 | $ | 601,379 | ||||||||
Federal Home Loan Bank advances | 41,500 | 40,889 | 53,500 | 53,183 | ||||||||||||
Subordinated debt | 30,929 | 30,427 | 10,310 | 10,310 |
Notional | Notional | |||||||||||||||
Amount | Amount | |||||||||||||||
Off-balance sheet instruments: | ||||||||||||||||
Commitments to extend credit | $ | 252,617 | $ | — | $ | 160,849 | $ | — | ||||||||
Standby letters of credit | 57,550 | 227 | 45,342 | 188 |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Minimum | ||||||||||||||||||||||||
To Be Well-Capitalized | ||||||||||||||||||||||||
Minimum | Under Prompt | |||||||||||||||||||||||
Capital | Corrective | |||||||||||||||||||||||
Actual | Requirement | Action Provisions | ||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
At December 31, 2005 | ||||||||||||||||||||||||
Total capital to risk weighted assets: | ||||||||||||||||||||||||
Pinnacle Financial | $ | 105,101 | 12.6 | % | $ | 66,521 | 8.0 | % | not applicable | |||||||||||||||
Pinnacle National | $ | 90,215 | 10.9 | % | $ | 66,334 | 8.0 | % | $ | 82,917 | 10.0 | % | ||||||||||||
Tier I capital to risk weighted assets: | ||||||||||||||||||||||||
Pinnacle Financial | $ | 97,243 | 11.7 | % | $ | 33,261 | 4.0 | % | not applicable | |||||||||||||||
Pinnacle National | $ | 82,357 | 9.9 | % | $ | 33,167 | 4.0 | % | $ | 49,751 | 6.0 | % | ||||||||||||
Tier I capital to average assets (*): | ||||||||||||||||||||||||
Pinnacle Financial | $ | 97,243 | 9.9 | % | $ | 39,444 | 4.0 | % | not applicable | |||||||||||||||
Pinnacle National | $ | 82,357 | 8.4 | % | $ | 39,444 | 4.0 | % | $ | 49,305 | 5.0 | % | ||||||||||||
At December 31, 2004 | ||||||||||||||||||||||||
Total capital to risk weighted assets: | ||||||||||||||||||||||||
Pinnacle Financial | $ | 73,540 | 12.7 | % | $ | 46,410 | 8.0 | % | not applicable | |||||||||||||||
Pinnacle National | $ | 63,775 | 11.0 | % | $ | 46,373 | 8.0 | % | $ | 57,967 | 10.0 | % | ||||||||||||
Tier I capital to risk weighted assets: | ||||||||||||||||||||||||
Pinnacle Financial | $ | 67,880 | 11.7 | % | $ | 23,205 | 4.0 | % | not applicable | |||||||||||||||
Pinnacle National | $ | 58,115 | 10.0 | % | $ | 23,187 | 4.0 | % | $ | 34,780 | 6.0 | % | ||||||||||||
Tier I capital to average assets (*): | ||||||||||||||||||||||||
Pinnacle Financial | $ | 67,880 | �� | 9.7 | % | $ | 28,134 | 4.0 | % | not applicable | ||||||||||||||
Pinnacle National | $ | 58,115 | 8.3 | % | $ | 28,116 | 4.0 | % | $ | 35,145 | 5.0 | % |
(*) | Average assets for the above calculations were fourth quarter amounts. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Commercial | Investment | Mortgage | Total | |||||||||||||
Banking | Services | Origination | Company | |||||||||||||
2005: | ||||||||||||||||
Net interest income | $ | 29,038 | $ | — | $ | — | $ | 29,038 | ||||||||
Provision for loan losses | 2,152 | — | — | 2,152 | ||||||||||||
Noninterest income | 2,675 | 1,573 | 1,146 | 5,394 | ||||||||||||
Noninterest expense | 19,315 | 1,171 | 546 | 21,032 | ||||||||||||
Income tax expense | 2,809 | 154 | 230 | 3,193 | ||||||||||||
Net income | $ | 7,437 | $ | 248 | $ | 370 | $ | 8,055 | ||||||||
End of period assets | $ | 1,016,772 | $ | — | $ | — | $ | 1,016,772 | ||||||||
2004: | ||||||||||||||||
Net interest income | $ | 20,264 | $ | — | $ | — | $ | 20,264 | ||||||||
Provision for loan losses | 2,948 | — | — | 2,948 | ||||||||||||
Noninterest income | 2,348 | 1,313 | 1,317 | 4,978 | ||||||||||||
Noninterest expense | 12,884 | 1,004 | 915 | 14,803 | ||||||||||||
Income tax expense | 1,900 | 118 | 154 | 2,172 | ||||||||||||
Net income | $ | 4,880 | $ | 191 | $ | 248 | $ | 5,319 | ||||||||
End of period assets | $ | 727,139 | $ | — | $ | — | $ | 727,139 | ||||||||
2003: | ||||||||||||||||
Net interest income | $ | 12,899 | $ | — | $ | — | $ | 12,899 | ||||||||
Provision for loan losses | 1,157 | — | — | 1,157 | ||||||||||||
Noninterest income | 1,511 | 833 | 691 | 3,035 | ||||||||||||
Noninterest expense | 9,483 | 872 | 441 | 10,796 | ||||||||||||
Income tax expense | 1,347 | (15 | ) | 94 | 1,426 | |||||||||||
Net income | $ | 2,423 | $ | (24 | ) | $ | 156 | $ | 2,556 | |||||||
End of period assets | $ | 498,421 | $ | — | $ | — | $ | 498,421 | ||||||||
2005 | 2004 | |||||||
Assets: | ||||||||
Cash | $ | 12,679,759 | $ | 8,091,049 | ||||
Investments in consolidated subsidiaries: | ||||||||
Pinnacle National | 79,463,336 | 58,140,549 | ||||||
Pinnacle Advisory Services | 107,086 | 15,450 | ||||||
Pinnacle Credit Enhancement Holdings | 123,431 | 245 | ||||||
Investment in unconsolidated subsidiaries: | ||||||||
PNFP Statutory Trust I | 310,000 | 310,000 | ||||||
PNFP Statutory Trust II | 619,000 | — | ||||||
Income taxes receivable from subsidiaries | 676,886 | 1,807,272 | ||||||
Other assets | 618,650 | 139,175 | ||||||
$ | 94,598,148 | $ | 68,503,740 | |||||
Liabilities and stockholders’ equity: | ||||||||
Current income taxes payable | 232,723 | 312,221 | ||||||
Subordinated debt | 30,929,000 | 10,310,000 | ||||||
Other liabilities | — | 1,344 | ||||||
Stockholders’ equity | 63,436,425 | 57,880,175 | ||||||
$ | 94,598,148 | $ | 68,503,740 | |||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2005 | 2004 | 2003 | ||||||||||
Revenues – Interest income | $ | 133,748 | $ | 63,121 | $ | 24,833 | ||||||
Expenses: | ||||||||||||
Interest expense – subordinated debentures | 985,645 | 431,318 | — | |||||||||
Compensation expense – restricted stock | 244,724 | 43,009 | — | |||||||||
Other expense | 58,772 | 100,179 | 23,113 | |||||||||
Income (loss) before income taxes and equity in income of subsidiaries | (1,155,393 | ) | (511,385 | ) | 1,720 | |||||||
Income tax (expense) benefit | 438,270 | 198,516 | (657 | ) | ||||||||
Income before equity in income of subsidiaries | (717,123 | ) | (312,869 | ) | 1,063 | |||||||
Equity in income of subsidiaries | 8,772,391 | 5,631,779 | 2,553,576 | |||||||||
Net income | $ | 8,055,268 | $ | 5,318,910 | $ | 2,554,639 | ||||||
2005 | 2004 | 2003 | ||||||||||
Operating activities: | ||||||||||||
Net income | $ | 8,055,268 | $ | 5,318,910 | $ | 2,554,639 | ||||||
Adjustments to reconcile net income to net cash provided (used) by operating activities: | ||||||||||||
Amortization of compensation expense related to restricted stock awards | 244,724 | 43,009 | — | |||||||||
Decrease (increase) in income taxes receivable, net | 1,050,887 | (1,447,991 | ) | (47,060 | ) | |||||||
Decrease (increase) in other assets | (479,474 | ) | 12,365 | (1,540 | ) | |||||||
Increase (decrease) in other liabilities | (1,344 | ) | (8,656 | ) | 4,385 | |||||||
Deferred tax expense | — | — | 47,726 | |||||||||
Equity in income of subsidiaries | (8,772,391 | ) | (5,631,779 | ) | (2,553,576 | ) | ||||||
Net cash provided (used) by operating activities | 97,670 | (1,714,142 | ) | 4,574 | ||||||||
Investing activities– | ||||||||||||
Investment in unconsolidated subsidiaries: | (619,000 | ) | — | (310,000 | ) | |||||||
Investment in consolidated subsidiaries: | ||||||||||||
Pinnacle National | (15,500,000 | ) | (17,556,000 | ) | (4,244,500 | ) | ||||||
Other subsidiaries | (183,721 | ) | (57,812 | ) | — | |||||||
Net cash used by investing activities | (16,302,721 | ) | (17,613,812 | ) | (4,554,500 | ) | ||||||
Financing activities– | ||||||||||||
Proceeds from issuance of subordinated debt | 20,619,000 | — | 10,310,000 | |||||||||
Debt issuance costs related to issuance of subordinated debt | — | — | (150,000 | ) | ||||||||
Net proceeds from sale of common stock | — | 18,192,167 | — | |||||||||
Exercise of common stock options | 174,761 | 118,113 | — | |||||||||
Net cash provided by financing activities | 20,793,761 | 18,310,280 | 10,160,000 | |||||||||
Net increase (decrease) in cash | 4,588,710 | (1,017,674 | ) | 5,610,074 | ||||||||
Cash, beginning of year | 8,091,049 | 9,108,723 | 3,498,649 | |||||||||
Cash, end of year | $ | 12,679,759 | $ | 8,091,049 | $ | 9,108,723 | ||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First | Second | Third | Fourth | |||||||||||||
(in thousands, except per share data) | Quarter | Quarter | Quarter | Quarter | ||||||||||||
2005 | ||||||||||||||||
Interest income | $ | 9,270 | $ | 10,544 | $ | 12,379 | $ | 14,118 | ||||||||
Net interest income | 6,503 | 6,795 | 7,456 | 8,287 | ||||||||||||
Provision for loan losses | 601 | 483 | 366 | 702 | ||||||||||||
Net income before taxes | 2,499 | 2,762 | 2,867 | 3,119 | ||||||||||||
Net income | 1,780 | 1,959 | 2,078 | 2,238 | ||||||||||||
Basic net income per share | $ | 0.21 | $ | 0.23 | $ | 0.25 | $ | 0.27 | ||||||||
Diluted net income per share | $ | 0.19 | $ | 0.21 | $ | 0.22 | $ | 0.24 | ||||||||
2004 | ||||||||||||||||
Interest income | $ | 5,666 | $ | 6,225 | $ | 7,214 | $ | 8,574 | ||||||||
Net interest income | 4,152 | 4,536 | 5,299 | 6,278 | ||||||||||||
Provision for loan losses | 354 | 449 | 1,012 | 1,134 | ||||||||||||
Net income before taxes | 1,611 | 1,655 | 1,961 | 2,263 | ||||||||||||
Net income | 1,071 | 1,168 | 1,391 | 1,689 | ||||||||||||
Basic net income per share | $ | 0.15 | $ | 0.16 | $ | 0.18 | $ | 0.20 | ||||||||
Diluted net income per share | $ | 0.13 | $ | 0.14 | $ | 0.16 | $ | 0.18 |
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Exhibit No. | Description | |
2.1 | Merger Agreement, dated September 30, 2005, by and between Pinnacle Financial Partners, Inc. and Cavalry Bancorp, Inc. (schedules and exhibits to which been omitted pursuant to Items 601(b)(2) of Regulations S-K(1) | |
3.1 | Amended and Restated Charter(2) | |
3.2 | Bylaws(3) | |
4.1.1 | Specimen Common Stock Certificate(4) | |
4.1.2 | See Exhibits 3.1 and 3.2 for provisions of the Charter and Bylaws defining rights of holders of the Common Stock | |
10.1 | Lease Agreement by and between TMP, Inc. (former name of Pinnacle Financial Partners, Inc.) and Commercial Street Associates dated March 16, 2000 (main office)(4) | |
10.4 | Form of Pinnacle Financial Partners, Inc.’s Organizers’ Warrant Agreement(4) | |
10.7 | Employment Agreement dated as of August 1, 2000 by and between Pinnacle National Bank, Pinnacle Financial Partners, Inc. and Robert A. McCabe, Jr.(4) * |
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Exhibit No. | Description | |
10.8 | Employment Agreement dated as of April 1, 2000 by and between Pinnacle National Bank, Pinnacle Financial Partners, Inc. and Hugh M. Queener(4) * | |
10.9 | Letter Agreement dated March 14, 2000 and accepted March 16, 2000 by and between Pinnacle Financial Corporation (now known as Pinnacle Financial Partners, Inc.) and Atkinson Public Relations(4) | |
10.14 | Employment Agreement dated March 1, 2000 by and between Pinnacle National Bank, Pinnacle Financial Partners, Inc. and M. Terry Turner(4)* | |
10.15 | Pinnacle Financial Partners, Inc. 2000 Stock Incentive Plan(4)* | |
10.16 | Form of Pinnacle Financial Partners, Inc.’s Stock Option Award(4)* | |
10.18 | Agreement for Assignment of Lease by and between Franklin National Bank and TMP, Inc., now known as Pinnacle Financial Partners, Inc., effective July 17, 2000(4) | |
10.19 | Form of Assignment of Lease and Consent of Landlord by Franklin National Bank, Pinnacle Financial Partners, Inc., formerly TMP, Inc., and Stearns Investments, Jack J. Stearns and Edna Stearns, General Partners(4) | |
10.21 | Green Hills Office Lease(5) | |
10.23 | Form of Restricted Stock Award Agreement(6) | |
10.24 | Form of Incentive Stock Option Agreement(6) | |
10.25 | Lease Agreement for West End Lease(7) | |
10.26 | Lease Amendments for Commerce Street location(7) | |
10.27 | Pinnacle Financial Partners, Inc. 2004 Equity Incentive Plan(8) * | |
10.28 | 2005 Annual Cash Incentive Plan(2) * | |
10.29 | Fourth Amendment to Commerce Street Lease(2) | |
10.30 | Employment Agreement by and between Pinnacle National Bank and Ed C. Loughry, Jr.(9) * | |
10.31 | Employment Agreement by and between Pinnacle National Bank and William S. Jones(9) * | |
10.32 | Consulting Agreement by and between Pinnacle National Bank and Ronnie F. Knight(9) * | |
10.33 | 2006 Director Compensation Summary(10) * | |
10.34 | Form of Restricted Stock Agreement for non-employee directors(10) * | |
10.35 | Form of Non-Qualified Stock Option Agreement * | |
10.36 | Named Executive Officer Compensation Summary * | |
21.1 | Subsidiaries of Pinnacle Financial Partners, Inc. | |
23.1 | Consent of KPMG LLP | |
31.1 | Certification pursuant to Rule 13a-14(a)/15d-14(a) | |
31.2 | Certification pursuant to Rule 13a-14(a)/15d-14(a) | |
32.1 | Certification pursuant to 18 USC Section 1350 – Sarbanes-Oxley Act of 2002 |
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Exhibit No. | Description | |
32.2 | Certification pursuant to 18 USC Section 1350 – Sarbanes-Oxley Act of 2002 |
(*) | Management compensatory plan or arrangement | |
(1) | Registrant hereby incorporates by reference to Registrant’s Current Report on Form 8-K filed on October 3, 2005. | |
(2) | Registrant hereby incorporates by reference to Registrant’s Form 10-Q for the quarter ended March 31, 2005. | |
(3) | Registrant hereby incorporates by reference to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2002 as filed with the SEC on March 6, 2003. | |
(4) | Registrant hereby incorporates by reference to the Registrant’s Registration Statement on Form SB-2, as amended (File No. 333-38018). | |
(5) | Registrant hereby incorporates by reference to the Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000 as filed with the SEC on March 29, 2001. | |
(6) | Registrant hereby incorporates by reference to Registrant’s Form 10-Q for the quarter ended September 30, 2004. | |
(7) | Registrant hereby incorporates by reference to Registrant’s Form 10-K for the fiscal year ended December 31, 2004 as filed with the SEC on February 28, 2005. | |
(8) | Registrant hereby incorporates by reference to Registrant’s Current Report on Form 8-K filed on April 19, 2005. | |
(9) | Registrant hereby incorporates by reference to Registrant’s Registration Statement on Form S-4, as amended (File No. 333-129076). | |
(10) | Registrant hereby incorporates by reference to Registrant’s Current Report on Form 8-K filed on January 23, 2006. |
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PINNACLE FINANCIAL PARTNERS, INC. | |||
Date: February 24, 2006 | By: | /s/ M. Terry Turner | |
M. Terry Turner | |||
President and CEO |
Signature | Title | Date | ||
/s/ Robert A. McCabe, Jr. | Chairman of the Board | February 24, 2006 | ||
Robert A. McCabe, Jr. | ||||
/s/ M. Terry Turner | President and Chief | February 24, 2006 | ||
M. Terry Turner | Executive Officer | |||
(Principal Executive Officer) | ||||
/s/ Harold R. Carpenter | Chief Financial Officer | February 24, 2006 | ||
Harold R. Carpenter | (Principal Financial | |||
and Accounting Officer) | ||||
/s/ Sue R. Atkinson | Director | February 24, 2006 | ||
Sue R. Atkinson | ||||
/s/ Gregory L. Burns | Director | February 24, 2006 | ||
Gregory L. Burns | ||||
/s/ Colleen Conway-Welch | Director | February 24, 2006 | ||
Colleen Conway-Welch | ||||
/s/ Clay T. Jackson | Director | February 24, 2006 | ||
Clay T. Jackson | ||||
/s/ John E. Maupin, Jr. | Director | February 24, 2006 | ||
John E. Maupin, Jr. | ||||
Director | ||||
Hal N. Pennington | ||||
/s/ Dale W. Polley | Director | February 24 2006 | ||
Dale W. Polley | ||||
/s/ James L. Shaub, II | Director | February 24, 2006 | ||
James L. Shaub, II | ||||
/s/ Reese L. Smith, III | Director | February 24, 2006 | ||
Reese L. Smith, III |
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Exhibit No. | Description | |
2.1 | Merger Agreement, dated September 30, 2005, by and between Pinnacle Financial Partners, Inc. and Cavalry Bancorp, Inc. (schedules and exhibits to which been omitted pursuant to Items 601(b)(2) of Regulations S-K(1) | |
3.1 | Amended and Restated Charter(2) | |
3.2 | Bylaws(3) | |
4.1.3 | Specimen Common Stock Certificate(4) | |
4.1.4 | See Exhibits 3.1 and 3.2 for provisions of the Charter and Bylaws defining rights of holders of the Common Stock | |
10.1 | Lease Agreement by and between TMP, Inc. (former name of Pinnacle Financial Partners, Inc.) and Commercial Street Associates dated March 16, 2000 (main office)(4) | |
10.4 | Form of Pinnacle Financial Partners, Inc.’s Organizers’ Warrant Agreement(4) | |
10.7 | Employment Agreement dated as of August 1, 2000 by and between Pinnacle National Bank, Pinnacle Financial Partners, Inc. and Robert A. McCabe, Jr.(4) * | |
10.8 | Employment Agreement dated as of April 1, 2000 by and between Pinnacle National Bank, Pinnacle Financial Partners, Inc. and Hugh M. Queener(4) * | |
10.9 | Letter Agreement dated March 14, 2000 and accepted March 16, 2000 by and between Pinnacle Financial Corporation (now known as Pinnacle Financial Partners, Inc.) and Atkinson Public Relations(4) | |
10.14 | Employment Agreement dated March 1, 2000 by and between Pinnacle National Bank, Pinnacle Financial Partners, Inc. and M. Terry Turner(4) * | |
10.15 | Pinnacle Financial Partners, Inc. 2000 Stock Incentive Plan(4) * | |
10.16 | Form of Pinnacle Financial Partners, Inc.’s Stock Option Award(4) * | |
10.18 | Agreement for Assignment of Lease by and between Franklin National Bank and TMP, Inc., now known as Pinnacle Financial Partners, Inc., effective July 17, 2000(4) | |
10.19 | Form of Assignment of Lease and Consent of Landlord by Franklin National Bank, Pinnacle Financial Partners, Inc., formerly TMP, Inc., and Stearns Investments, Jack J. Stearns and Edna Stearns, General Partners(4) | |
10.22 | Green Hills Office Lease(5) | |
10.23 | Form of Restricted Stock Award Agreement(6) | |
10.24 | Form of Incentive Stock Option Agreement(6) | |
10.25 | Lease Agreement for West End Lease(7) | |
10.26 | Lease Amendments for Commerce Street location(7) | |
10.27 | Pinnacle Financial Partners, Inc. 2004 Equity Incentive Plan(8) * | |
10.28 | 2005 Annual Cash Incentive Plan(2) * | |
10.29 | Fourth Amendment to Commerce Street Lease(2) | |
10.30 | Employment Agreement by and between Pinnacle National Bank and Ed C. Loughry, Jr.(9) * |
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Exhibit No. | Description | |
10.31 | Employment Agreement by and between Pinnacle National Bank and William S. Jones(9) * | |
10.32 | Consulting Agreement by and between Pinnacle National Bank and Ronnie F. Knight(9) * | |
10.33 | 2006 Director Compensation Summary(10) * | |
10.34 | Form of Restricted Stock Agreement for non-employee directors(10) * | |
10.35 | Form of Non-Qualified Stock Option Agreement * | |
10.36 | Named Executive Officer Compensation Summary * | |
21.1 | Subsidiaries of Pinnacle Financial Partners, Inc. | |
23.1 | Consent of KPMG LLP | |
31.1 | Certification pursuant to Rule 13a-14(a)/15d-14(a) | |
31.2 | Certification pursuant to Rule 13a-14(a)/15d-14(a) | |
32.1 | Certification pursuant to 18 USC Section 1350 – Sarbanes-Oxley Act of 2002 | |
32.2 | Certification pursuant to 18 USC Section 1350 – Sarbanes-Oxley Act of 2002 |
(*) | Management compensatory plan or arrangement | |
(1) | Registrant hereby incorporates by reference to Registrant’s Current Report on Form 8-K filed on October 3, 2005. | |
(2) | Registrant hereby incorporates by reference to Registrant’s Form 10-Q for the quarter ended March 31, 2005. | |
(3) | Registrant hereby incorporates by reference to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2002 as filed with the SEC on March 6, 2003. | |
(4) | Registrant hereby incorporates by reference to the Registrant’s Registration Statement on Form SB-2, as amended (File No. 333-38018). | |
(5) | Registrant hereby incorporates by reference to the Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000 as filed with the SEC on March 29, 2001. | |
(6) | Registrant hereby incorporates by reference to Registrant’s Form 10-Q for the quarter ended September 30, 2004. | |
(7) | Registrant hereby incorporates by reference to Registrant’s Form 10-K for the fiscal year ended December 31, 2004 as filed with the SEC on February 28, 2005. | |
(8) | Registrant hereby incorporates by reference to Registrant’s Current Report on Form 8-K filed on April 19, 2005. | |
(9) | Registrant hereby incorporates by reference to Registrant’s Registration Statement on Form S-4, as amended (File No. 333-129076). | |
(10) | Registrant hereby incorporates by reference to Registrant’s Current Report on Form 8-K filed on January 23, 2006. |
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