EXHIBIT 99.1 (PINNACLE LOGO) FOR IMMEDIATE RELEASE - --------------------- MEDIA CONTACT: Vicki Kessler 615-320-7532 FINANCIAL CONTACT: Harold Carpenter 615-744-3742 WEBSITE: www.pnfp.com PINNACLE FINANCIAL REPORTS RECORD EARNINGS ASSETS GROW TO $872 MILLION AND DILUTED EARNINGS PER SHARE IS $0.21 NASHVILLE, Tenn., July 19, 2005 - Pinnacle Financial Partners Inc. (Nasdaq: PNFP) today reported record earnings for the quarter ended June 30, 2005, including quarterly year-to-year net income growth exceeding 60 percent for the 10th consecutive quarter. SECOND QUARTER 2005 HIGHLIGHTS: o Record net income of $1.96 million, up 68 percent from the prior year's $1.17 million o Record diluted earnings per share of $0.21, up 50 percent from the prior year's $0.14 o Strong balance sheet growth: o Average loans up 56 percent from the same period last year o Average total deposits up 46 percent from the same period last year, with average noninterest bearing demand deposit accounts up 54 percent from the same period last year o Superior credit quality: o Net charge-off's as a percentage of average loans of only 0.02 percent o Past due loans over 30 days of only 0.21 percent of total loans o Nonperforming assets of only 0.11 percent of total loans and other real estate "We are again reporting net income growth over 60 percent and strong loan and deposit growth for this quarter," said M. Terry Turner, President and CEO of Pinnacle Financial Partners. "Our goal has been to balance growth in volumes with growth in earnings such that shareholder value is maximized over both the short- and long-term." Pinnacle Reports Continued Growth - 2 of 6 FINANCIAL PERFORMANCE o Return on average assets for the quarter ended June 30, 2005, was 0.96 percent compared to 0.82 percent for the same quarter last year. o Return on average stockholders' equity for the quarter ended June 30, 2005, was 13.21 percent compared to 12.83 percent for the same quarter last year. o Efficiency ratio (noninterest expense divided by net interest income and noninterest income) was 60.4 percent during the second quarter of 2005 compared to 62.4 percent during the second quarter of 2004. Total assets grew to $872 million as of June 30, 2005, up $286 million or 49 percent from the $586 million reported at June 30, 2004. Loans as of June 30, 2005, were $557 million, or 57 percent higher than the $355 million reported at June 30, 2004. Total deposits increased to $690 million at June 30, 2005, or 48 percent higher than the $467 million reported at June 30, 2004. "Our asset growth was excellent for the second quarter," said Turner. "Even with this significant asset growth and the associated provision expense we were able to maintain our ROA at a level consistent with the first quarter of 2005. We are also pleased that ROE for the second quarter was an all time high for our firm." REVENUE o Revenue (the sum of net interest income and noninterest income) for the quarter ended June 30, 2005 amounted to $8.2 million compared to $5.6 million for the same quarter of last year, an increase of 46.6 percent. o Net interest income for the quarter ended June 30, 2005, was $6.80 million compared to $4.54 million for the quarter ended June 30, 2004, an increase of 49.8 percent. o Net interest margin for the second quarter of 2005 was 3.57 percent, compared to a net interest margin of 3.51 percent reported during the second quarter in 2004 and 3.78 percent for the first quarter of 2005. o Percentage of daily floating rate loans to total loans was 55.9 percent at June 30, 2005. o Noninterest income for the quarter ended June 30, 2005, was $1,416,000 compared to $1,067,000 during the same quarter in 2004, an increase of 32.7 percent. Pinnacle Reports Continued Growth - 3 of 6 "Our net interest margin of 3.57 percent was higher than the net interest margin for the same quarter last year and lower than our net interest margin for the first quarter of this year," said Harold Carpenter, Chief Financial Officer of Pinnacle Financial Partners. "The decline in our net interest margin between the first and second quarters of 2005 was due to several factors, with the primary contributor being a rapid rise in deposit rates over the past few months. Our internal models indicate that our balance sheet remains structurally asset sensitive and, although Nashville continues to be a very competitive deposit pricing market, our belief is that with anticipated increases in short-term rates currently forecasted for the remainder of 2005, we should be in the position to maintain our net interest margin for the remainder of the year. At a time when many banks are faced with margin compression and therefore lower net interest income, our associates remain focused on growing our volumes which enables us to forecast continued growth in net interest income." At June 30, 2005, the ratio of investment securities to total assets declined to 26.1 percent compared to 28.2 percent at June 30, 2004. Pinnacle anticipates that this ratio will approximate 25.0 to 27.0 percent for the remainder of 2005 and represents a slight shift in asset mix to the higher yielding loan category. The increase in noninterest income was due to the further development of Pinnacle's mortgage origination unit, increased service charges due to more deposit accounts and increased investment services income from Pinnacle Asset Management. For the quarter ended June 30, 2005, noninterest income represented approximately 17.2 percent of total revenues, compared to 19.0 percent for the same quarter in 2004. NONINTEREST EXPENSE o Noninterest expense for the quarter ended June 30, 2005, was $4.96 million compared to $3.50 million for the same quarter in 2004. Compensation and employee benefits expense increased approximately 41 percent over the same quarter last year due primarily to an increase in personnel. At June 30, 2005, Pinnacle employed 146.5 full-time equivalent personnel compared to 101.5 at June 30, 2004, an increase of approximately 44 percent. Equipment and occupancy expenses increased 67.1 percent over the same period last year due in large part to increased square footage for operating units at our downtown Nashville location and additional branch offices. Pinnacle Reports Continued Growth - 4 of 6 CREDIT QUALITY o Provision for loan losses was $483,000 for the second quarter of 2005 compared to $449,000 in the second quarter in 2004. The following impacted the amount of the provision for loan losses in the second quarter of 2005 when compared to the same period in 2004: o Loan growth in the second quarter of 2005 of $40 million compared to loan growth of $32 million in the second quarter of 2004. o Net charge-offs were $22,000 in the second quarter of 2005 compared to net charge-offs of $25,000 during the same period in 2004. o Allowance for loan losses represented 1.20 percent of total loans at June 30, 2005, compared to 1.26 percent at June 30, 2004. o Annualized net charge-offs to average loans were 0.02 percent for the second quarter of 2005 compared to 0.03 percent for the second quarter of 2004. o Nonperforming assets as a percentage of total loans and other real estate decreased to 0.11 percent at June 30, 2005, from 0.38 percent at June 30, 2004. "We remain extremely pleased with the credit quality of our firm," said Turner. "In the first half of this year, asset quality indicators have been consistent with the superior levels we have experienced throughout most of the life of this firm. Specifically, our nonperforming assets, net charge-off and past due ratios are at exceptional levels and better than national peer group averages. We continue to believe that our asset quality is the best predictor of our ability to create long-term shareholder value." OTHER SECOND QUARTER 2005 DEVELOPMENTS o A continued focus on treasury management services and growth in demand deposit accounts. For the quarter ended June 30, 2005, average noninterest-bearing deposit balances averaged $112 million compared to $73 million for the same quarter last year, an increase of 54 percent. "We are very pleased with the steady growth in demand deposit operating accounts and commercial customer repurchase accounts," said Robert A. McCabe Jr., Chairman of the Board of Pinnacle. "Additionally, we expect to produce long-term growth in both balances and service charges for our firm through our recent and continuing investments to enhance our treasury management capabilities." Pinnacle Reports Continued Growth - 5 of 6 o Pinnacle grew to 148 associates (146.5 full-time equivalent) at June 30, 2005, with 106 working in client contact areas and 42 in operational and corporate areas. This represents an increase of 25 employees from the 123 employees as of December 31, 2004. Pinnacle's annual retention rate was 96.6 percent at June 30, 2005, representing a very high level of engagement for Pinnacle's associates. Approximately 22 associate additions are currently planned for the remainder of 2005 with 16 to be in client contact areas. o Pinnacle opened its eighth office, located in Hendersonville, Tenn., which is the largest city in Sumner County, a very attractive county within the Nashville MSA. o Pinnacle is considering a ninth location to be opened in late 2005 or early 2006 in the Nashville MSA. Pinnacle expects to add another two offices in the Nashville MSA in 2006, which would bring the company's total number of offices to 11. INVESTMENT OUTLOOK Management has developed several financial forecast scenarios for the next several quarters. Based on anticipated growth trends and future investments in the franchise, Pinnacle estimates its third quarter 2005 diluted earnings per share will approximate $0.21 to $0.22. Pinnacle tightened the estimate for diluted earnings per share for the year ending Dec. 31, 2005, to range between $0.84 and $0.87. Additionally, Pinnacle currently estimates total asset balances will approximate $1 billion by the end of 2005 as a result of continued organic growth. Pinnacle continues to anticipate significant loan demand for the remainder of 2005 and, as a result, has considered the increased provision for loan losses associated with increased loan balances in these estimates. As noted previously, management has developed several scenarios under which these estimates can be achieved and believes these estimates to be reasonable based on these scenarios. However, unanticipated events or developments, including the execution of any initiative involving the development of any market other than the current Nashville franchise, the opportunity to hire more seasoned professionals than anticipated or the ability to grow loans significantly in excess of the levels contemplated, may cause the actual results of Pinnacle to differ materially from these estimates. The estimates do not include compensation expense related to the expensing of stock options that have been and may be granted to employees under the firm's broad-based stock option plans. Pinnacle will begin including such compensation expense in its statement of income in 2006. Pinnacle Reports Continued Growth - 6 of 6 Pinnacle Financial Partners, the largest financial services firm headquartered in Nashville, provides a full range of banking, investment and insurance products and services designed for small- to mid-sized businesses and their owners/operators. Pinnacle provides financial planning services by a certified financial planner (CFP(R)), and a number of Pinnacle's senior financial advisors provide comprehensive wealth management services to help clients increase, protect and distribute their assets. Pinnacle opened its first office in October 2000 in Commerce Center in downtown Nashville. Since then the firm has added Nashville offices in the Rivergate, Green Hills and West End areas and offices in Brentwood, Cool Springs and Franklin in Williamson County. Just recently, the firm added its eighth office in Hendersonville in Sumner County. Additional information concerning Pinnacle can be accessed at www.pnfp.com. ### Certain of the statements in this release may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words "expect," "anticipate," "intend," "plan," "believe," "seek," "estimate" and similar expressions are intended to identify such forward-looking statements, but other statements not based on historical information may also be considered forward-looking. All forward-looking statements are subject to risks, uncertainties and other facts that may cause the actual results, performance or achievements of Pinnacle to differ materially from any results expressed or implied by such forward-looking statements. Such factors include, without limitation, (i) unanticipated deterioration in the financial condition of borrowers resulting in significant increases in loan losses and provisions for those losses, (ii) the inability of Pinnacle to continue to grow its loan portfolio at historic rates, (iii) increased competition with other financial institutions, (iv) lack of sustained growth in the economy in the Nashville, Tennessee area, (v) rapid fluctuations or unanticipated changes in interest rates, (vi) the inability of Pinnacle to satisfy regulatory requirements for its expansion plans, (vii) the inability of Pinnacle to execute its expansion plans and (viii) changes in the legislative and regulatory environment. A more detailed description of these and other risks is contained in Pinnacle's most recent annual report on Form 10-K. Many of such factors are beyond Pinnacle's ability to control or predict, and readers are cautioned not to put undue reliance on such forward-looking statements. Pinnacle disclaims any obligation to update or revise any forward-looking statements contained in this release, whether as a result of new information, future events or otherwise. PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - UNAUDITED ====================================================================================================== JUNE 30, DECEMBER 31, 2005 2004 - ------------------------------------------------------------------------------------------------------ ASSETS Cash and noninterest-bearing due from banks ..................... $ 26,539,893 $ 15,243,796 Interest-bearing due from banks ................................. 856,279 379,047 Federal funds sold .............................................. 31,759,292 11,122,944 ------------- ------------- Cash and cash equivalents .................................. 59,155,464 26,745,787 Securities available-for-sale, at fair value .................... 200,570,147 180,573,820 Securities held-to-maturity (fair value of $26,962,307 and $27,134,913 at June 30, 2005 and December 31, 2004, respectively) .............................................. 27,368,065 27,596,159 Mortgage loans held-for-sale .................................... 6,179,783 1,634,900 Loans ........................................................... 556,786,300 472,362,219 Less allowance for loan losses .................................. (6,658,995) (5,650,014) ------------- ------------- Loans, net ................................................. 550,127,305 466,712,205 Premises and equipment, net ..................................... 12,658,540 11,130,671 Investments in unconsolidated subsidiaries and other entities ... 4,787,396 3,907,807 Accrued interest receivable ..................................... 3,613,145 2,639,548 Other assets .................................................... 7,615,947 6,198,553 ------------- ------------- Total assets ........................................... $ 872,075,792 $ 727,139,450 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Noninterest-bearing demand ................................. $ 142,794,083 $ 114,318,024 Interest-bearing demand .................................... 55,451,332 51,751,320 Savings and money market accounts .......................... 222,589,579 199,058,240 Time ....................................................... 269,084,294 205,599,425 ------------- ------------- Total deposits ......................................... 689,919,288 570,727,009 Securities sold under agreements to repurchase .................. 57,676,971 31,927,860 Federal Home Loan Bank advances ................................. 49,500,000 53,500,000 Subordinated debt ............................................... 10,310,000 10,310,000 Accrued interest payable ........................................ 1,421,570 769,300 Other liabilities ............................................... 1,747,159 2,025,106 ------------- ------------- Total liabilities ...................................... 810,574,988 669,259,275 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; 8,405,891 issued and outstanding at June 30, 2005 and 8,389,232 issued and outstanding at December 31, 2004 .. 8,405,891 8,389,232 Additional paid-in capital ................................. 44,484,410 44,376,307 Unearned compensation ...................................... (22,250) (37,250) Retained earnings .......................................... 8,858,134 5,127,023 Accumulated other comprehensive (loss) income, net ......... (225,381) 24,863 ------------- ------------- Total stockholders' equity ............................. 61,500,804 57,880,175 ------------- ------------- Total liabilities and stockholders' equity ............. $ 872,075,792 $ 727,139,450 ============= ============= PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED =================================================================================================================== THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 2005 2004 2005 2004 - ------------------------------------------------------------------------------------------------------------------- INTEREST INCOME: Loans, including fees ............................ $ 8,002,502 $4,505,938 $14,956,867 $ 8,452,510 Securities, available-for-sale Taxable ...................................... 2,134,735 1,555,145 4,156,518 3,106,004 Tax-exempt ................................... 238,914 99,010 440,338 184,985 Federal funds sold and other ..................... 167,664 65,364 256,970 148,081 ----------- ---------- ----------- ----------- Total interest income ........................ 10,543,815 6,225,457 19,810,692 11,891,580 ----------- ---------- ----------- ----------- INTEREST EXPENSE: Deposits ......................................... 2,877,229 1,328,050 5,031,190 2,499,238 Securities sold under agreements to repurchase ... 253,121 11,380 403,383 20,673 Federal funds purchased and other borrowings ..... 618,274 350,212 1,080,812 683,562 ----------- ---------- ----------- ----------- Total interest expense ....................... 3,748,624 1,689,642 6,515,385 3,203,473 ----------- ---------- ----------- ----------- Net interest income .......................... 6,795,191 4,535,815 13,295,307 8,688,107 PROVISION FOR LOAN LOSSES ............................. 482,690 448,474 1,083,940 802,322 ----------- ---------- ----------- ----------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES ... 6,312,501 4,087,341 12,211,367 7,885,785 NONINTEREST INCOME: Service charges on deposit accounts .............. 241,436 231,208 503,136 395,053 Investment services .............................. 491,453 404,516 928,877 794,095 Gain on loans and loan participations sold (1)(2). 390,261 266,462 550,816 427,017 Gain on sale of investment securities, net ....... -- -- 114,410 248,353 Other noninterest income ......................... 289,915 164,796 496,480 274,838 ----------- ---------- ----------- ----------- Total noninterest income ................. 1,413,065 1,066,982 2,593,720 2,139,356 ----------- ---------- ----------- ----------- NONINTEREST EXPENSE: Compensation and employee benefits (2) ........... 3,110,718 2,203,862 6,081,276 4,318,222 Equipment and occupancy .......................... 893,938 535,053 1,677,963 1,040,743 Marketing and other business development ......... 179,715 155,791 292,883 304,949 Postage and supplies ............................. 158,396 124,125 293,934 223,264 Other noninterest expense ........................ 620,452 479,127 1,198,036 870,584 ----------- ---------- ----------- ----------- Total noninterest expense .................... 4,963,219 3,497,958 9,544,092 6,757,762 ----------- ---------- ----------- ----------- INCOME BEFORE INCOME TAXES ............................ 2,762,347 1,656,365 5,260,995 3,267,379 Income tax expense ............................... 803,178 487,890 1,522,073 1,027,882 ----------- ---------- ----------- ----------- NET INCOME ............................................ $ 1,959,169 $1,168,475 $ 3,738,922 $ 2,239,497 =========== ========== =========== =========== PER SHARE INFORMATION: Basic net income per common share ................ $ 0.23 $ 0.16 $ 0.45 $ 0.30 =========== ========== =========== =========== Diluted net income per common share .............. $ 0.21 $ 0.14 $ 0.40 $ 0.27 =========== ========== =========== =========== Weighted average shares outstanding: Basic ....................................... 8,401,198 7,397,920 8,395,260 7,391,013 Diluted ..................................... 9,434,260 8,279,114 9,435,754 8,246,422 - -------------------------- (1) AMOUNTS REFLECT THE RECLASSIFICATION OF NONINTEREST INCOME PREVIOUSLY REPORTED AS "FEES FROM THE ORIGINATION OF MORTGAGE LOANS" TO "GAIN ON LOANS AND LOAN PARTICIPATIONS SOLD" TO CONFORM WITH THE PRESENTATION IN 2005. (2) SALES COMMISSION EXPENSES ASSOCIATED WITH MORTGAGE LOAN ORIGINATIONS PREVIOUSLY INCLUDED IN "COMPENSATION AND EMPLOYEE BENEFITS" HAVE BEEN RECLASSIFIED IN 2004 TO OFFSET NONINTEREST INCOME INCLUDED IN "GAIN ON LOANS AND LOAN PARTICIPATIONS SOLD". PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES ANALYSIS OF INTEREST INCOME AND EXPENSE, RATES AND YIELDS - UNAUDITED ====================================================================================================================== THREE MONTHS ENDED THREE MONTHS ENDED (DOLLARS IN THOUSANDS) JUNE 30, 2005 JUNE 30, 2004 - ----------------------------------------------------------------------------------------------------------------------- AVERAGE YIELD/ AVERAGE YIELD/ BALANCES INTEREST RATE(1) BALANCES INTEREST RATE(1) -------- -------- ------- -------- -------- ------- Interest-earning assets: Loans.................................. $ 537,313 $ 8,002 5.98% $ 343,974 $ 4,506 5.27% Securities: Taxable.............................. 194,840 2,135 4.39 157,547 1,555 3.97 Tax-exempt........................... 27,332 239 4.62 11,645 99 4.39 Federal funds sold..................... 14,879 111 2.99 11,055 25 0.91 Other.................................. 3,730 57 7.08 2,849 40 6.40 --------- ------ ---- --------- ------- ---- Total interest-earning assets........ 778,094 10,544 5.48 527,070 6,225 4.78 ------ ---- ------- ---- Non-earning assets........................ 44,250 28,367 --------- --------- Total assets........................... $ 822,344 $ 555,437 ========= ========= Interest-bearing liabilities: Interest-bearing deposits: Interest checking.................... $ 57,652 90 0.62 $ 37,755 44 0.47 Savings and money market............. 218,685 906 1.66 155,214 297 0.77 Certificates of deposit.............. 252,402 1,882 2.99 174,183 987 2.28 --------- ------ ---- --------- ------- ---- Total interest-bearing deposits. 528,739 2,878 2.18 367,152 1,328 1.45 Securities sold under agreements to repurchase........................... 49,883 253 2.04 17,523 11 0.26 Federal funds purchased and other...... 4,775 40 3.38 4,467 14 1.28 Federal Home Loan Bank advances........ 54,951 424 3.10 45,736 245 2.16 Subordinated debt...................... 10,310 154 5.98 10,310 91 3.54 --------- ------ ---- --------- ------- ---- Total interest-bearing liabilities... 648,658 3,749 2.32 445,188 1,689 1.53 Non-interest bearing demand deposits...... 111,937 -- -- 72,812 -- -- --------- ------ ---- --------- ------- ---- Total deposits and interest-bearing liabilities..................... 760,595 3,749 1.98 518,000 1,689 1.31 ------ ---- ------- ---- Other liabilities......................... 2,180 1,895 Stockholders' equity...................... 59,569 35,542 --------- --------- Total liabilities and stockholders' equity.......................... $ 822,344 $ 555,437 ========= ========= Net interest income....................... $6,795 $ 4,536 ====== ======= Net interest spread (2)................ 3.16% 3.25% Net interest margin (3)................ 3.57% 3.51% - ----------------------- (1) Yields computed on tax-exempt instruments on a tax equivalent basis. (2) Yields realized on interest-earning assets less the rates paid on interest-bearing liabilities. (3) Net interest margin is the result of annualized net interest income divided by average interest-earning assets for the period. PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES ANALYSIS OF INTEREST INCOME AND EXPENSE, RATES AND YIELDS - UNAUDITED ======================================================================================================================= SIX MONTHS ENDED SIX MONTHS ENDED (DOLLARS IN THOUSANDS) JUNE 30, 2005 JUNE 30, 2004 - ----------------------------------------------------------------------------------------------------------------------- AVERAGE YIELD/ AVERAGE YIELD/ BALANCES INTEREST RATE(1) BALANCES INTEREST RATE(1) -------- -------- ------- -------- -------- ------- Interest-earning assets: Loans.................................. $ 512,813 $14,957 5.88% $ 326,159 $ 8,452 5.22% Securities: Taxable.............................. 189,883 4,157 4.41 148,777 3,106 4.20 Tax-exempt........................... 25,329 440 4.62 10,720 185 4.47 Federal funds sold..................... 11,864 157 2.66 16,539 75 0.91 Other.................................. 3,503 100 6.85 2,625 73 6.30 --------- ------ ---- --------- ------- ---- Total interest-earning assets........ 743,392 19,811 5.42 504,820 11,891 4.77 ------ ---- ------- ---- Non-earning assets........................ 46,222 27,028 --------- --------- Total assets........................... $ 789,614 $ 531,848 ========= ========= Interest-bearing liabilities: Interest-bearing deposits: Interest checking.................... $ 57,695 162 0.57 $ 35,307 85 0.49 Savings and money market............. 220,382 1,604 1.47 150,973 583 0.78 Certificates of deposit.............. 234,507 3,266 2.81 167,870 1,831 2.19 --------- ------ ---- --------- ------- ---- Total interest-bearing deposits. 512,584 5,032 1.98 354,150 2,499 1.42 Securities sold under agreements to repurchase........................... 44,016 403 1.85 16,195 21 0.26 Federal funds purchased and other...... 2,694 44 3.33 2,234 14 1.28 Federal Home Loan Bank advances........ 52,592 748 2.87 44,058 476 2.17 Subordinated debt...................... 10,310 289 5.65 10,310 193 3.76 --------- ------ ---- --------- ------- ---- Total interest-bearing liabilities... 622,196 6,516 2.11 426,947 3,203 1.51 Non-interest bearing demand deposits...... 106,433 -- -- 67,133 -- -- --------- ------ ---- --------- ------- ---- Total deposits and interest-bearing liabilities..................... 728,629 6,516 1.80 494,080 3,203 1.30 ------ ---- ------- ---- Other liabilities......................... 1,990 2,144 Stockholders' equity...................... 58,995 35,624 --------- --------- Total liabilities and stockholders' equity.......................... $ 789,614 $ 531,848 ========= ========= Net interest income....................... $13,295 $ 8,688 ======= ======= Net interest spread (2)................ 3.31% 3.26% Net interest margin (3)................ 3.67% 3.51% - ------------------------ (1) Yields computed on tax-exempt instruments on a tax equivalent basis. (2) Yields realized on interest-earning assets less the rates paid on interest-bearing liabilities. (3) Net interest margin is the result of annualized net interest income divided by average interest-earning assets for the period. PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES SELECTED QUARTERLY FINANCIAL DATA - UNAUDITED ======================================================================================================================= (DOLLARS IN THOUSANDS, JUNE MAR DEC SEPT JUNE MAR EXCEPT PER SHARE DATA) 2005 2005 2004 2004 2004 2004 - ----------------------------------------------------------------------------------------------------------------------- BALANCE SHEET DATA, AT QUARTER END: Total assets........................ $872,076 787,436 727,139 685,408 586,313 541,052 Total loans......................... 556,786 516,733 472,362 434,909 355,267 323,416 Allowance for loan losses........... (6,659) (6,198) (5,650) (5,434) (4,466) (4,042) Securities.......................... 227,938 202,223 208,170 191,323 165,528 162,315 Total deposits...................... 689,919 619,021 570,727 541,859 467,321 437,601 Securities sold under agreements to repurchase................ 57,677 46,388 31,928 22,958 23,772 14,699 Advances from FHLB.................. 49,500 51,500 53,500 51,500 47,500 40,500 Subordinated debt................... 10,310 10,310 10,310 10,310 10,310 10,310 Total stockholders' equity.......... 61,501 57,657 57,880 56,668 35,125 36,266 BALANCE SHEET DATA, QUARTERLY AVERAGES: Total assets........................ $822,344 756,884 707,131 618,694 555,437 508,260 Total loans......................... 537,313 488,313 448,611 392,220 343,974 306,549 Securities.......................... 222,172 208,253 203,728 183,721 169,192 149,802 Total earning assets................ 778,094 708,690 670,839 589,554 527,070 482,572 Total deposits...................... 640,676 597,358 562,936 485,300 439,964 402,603 Securities sold under agreements to repurchase................ 49,883 38,149 23,520 25,953 17,523 14,868 Advances from FHLB.................. 54,951 50,233 48,022 49,000 45,736 42,379 Subordinated debt................... 10,310 10,310 10,310 10,310 10,310 10,310 Total stockholders' equity.......... 59,569 58,420 57,721 43,868 35,542 35,705 STATEMENT OF OPERATIONS DATA, FOR THE THREE MONTHS ENDED: Interest income..................... $10,544 9,270 8,574 7,214 6,225 5,666 Interest expense.................... 3,749 2,767 2,296 1,915 1,689 1,514 ------- ------- ------- ------- ------ ------- Net interest income............. 6,795 6,503 6,278 5,299 4,536 4,152 Provision for loan losses........... 483 601 1,134 1,012 449 354 ------- ------- ------- ------- ------ ------- Net interest income after provision for loan losses................. 6,312 5,902 5,144 4,287 4,087 3,798 Noninterest income.................. 1,413 1,178 1,246 1,534 1,067 1,072 Noninterest expense................. 4,963 4,581 4,127 3,860 3,499 3,329 ------- ------- ------- ------- ------ ------- Income before taxes.............. 2,762 2,499 2,263 1,961 1,655 1,611 Income tax expense.............. 803 719 574 570 487 540 ------- ------- ------- ------- ------ ------- Net income..................... $ 1,959 1,780 1,689 1,391 1,168 1,071 ======= ======= ======= ======= ====== ======= PER SHARE DATA: Earnings - basic.................... $ 0.23 0.21 0.20 0.18 0.16 0.15 Earnings - diluted.................. $ 0.21 0.19 0.18 0.16 0.14 0.13 Book value at quarter end (1)....... $ 7.32 6.87 6.90 6.75 4.74 4.91 Weighted avg. shares - basic....... 8,401,198 8,389,256 8,389,232 7,832,512 7,397,920 7,384,106 Weighted avg. shares - diluted...... 9,434,260 9,437,183 9,448,696 8,857,015 8,279,114 8,213,730 Common shares outstanding........... 8,405,891 8,391,371 8,389,232 8,389,232 7,404,586 7,384,106 CAPITAL RATIOS (2): Equity to total assets.............. 7.1% 7.3% 8.0% 8.3% 6.0% 6.7% Leverage............................ 8.8% 9.2% 9.7% 10.9% 8.4% 9.0% Tier one risk-based................. 10.0% 10.6% 11.7% 12.4% 10.2% 11.2% Total risk-based.................... 10.9% 11.5% 12.7% 13.4% 11.2% 12.1% INVESTOR INFORMATION: Closing sales price................. $ 24.00 20.72 22.62 21.50 18.30 15.25 High sales price during quarter..... $ 25.14 24.05 25.10 23.70 18.67 15.50 Low sales price during quarter...... $ 20.50 20.72 22.05 17.70 13.50 11.65 PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES SELECTED QUARTERLY FINANCIAL DATA - UNAUDITED ======================================================================================================================= (DOLLARS IN THOUSANDS, JUNE MAR DEC SEPT JUNE MAR EXCEPT PER SHARE DATA) 2005 2005 2004 2004 2004 2004 - ----------------------------------------------------------------------------------------------------------------------- PERFORMANCE RATIOS AND OTHER DATA: Return on average assets............ 0.96% 0.96% 0.95% 0.89% 0.82% 0.85% Return on avg. stockholders' equity....................... 13.21% 12.48% 11.61% 12.58% 12.83% 12.03% Net interest margin (3)............. 3.57% 3.78% 3.78% 3.62% 3.51% 3.49% Noninterest income to total revenue (4).................. 17.2% 15.3% 16.6% 22.5% 19.0% 21.4% Noninterest income to avg. assets... 0.69% 0.62% 0.70% 0.99% 0.77% 0.89% Noninterest exp. to avg. assets..... 2.42% 2.42% 2.33% 2.50% 2.52% 2.61% Efficiency ratio (5)................ 60.4% 59.6% 54.9% 56.5% 62.4% 62.8% Avg. loans to average deposits...... 83.9% 81.7% 79.7% 80.8% 78.2% 76.6% Securities to total assets.......... 26.1% 25.7% 29.1% 27.9% 28.2% 30.0% Average interest-earning assets to average interest-bearing liabilities.................. 120.0% 119.0% 121.9% 121.0% 118.3% 118.1% Brokered time deposits to total deposits..................... 8.6% 8.3% 7.6% 8.2% 8.8% 8.2% SELECTED GROWTH RATES, LAST TWELVE MONTHS (6): Total average assets................ 48.6% 48.9% 55.6% 52.3% 52.0% 55.9% Average loans....................... 56.2% 59.3% 58.3% 45.4% 40.2% 40.8% Total average deposits.............. 46.3% 48.4% 58.2% 54.4% 58.5% 65.3% Total revenue (4)................... 46.6% 45.4% 58.6% 58.1% 48.2% 71.2% Total noninterest expense........... 41.9% 38.0% 29.1% 38.4% 34.9% 48.9% Diluted earnings per share.......... 50.0% 46.2% 68.3% 58.5% 104.0% 168.6% ASSET QUALITY INFORMATION AND RATIOS: Nonaccrual loans and other real estate....................... $ 596 596 561 1,332 1,339 86 Past due loans over 90 days and still accruing interest...... $ 66 47 146 95 35 64 Net loan charge-offs (7)............ $ 22 53 918 43 25 30 Allowance for loan losses to total loans.................. 1.20% 1.20% 1.20% 1.25% 1.26% 1.25% As a percentage of total loans and ORE: Past due loans over 30 days . 0.21% 0.27% 0.37% 0.69% 0.21% 0.30% Nonperforming assets......... 0.11% 0.12% 0.12% 0.31% 0.38% 0.03% Potential problem loans (8).. 0.18% 0.08% 0.02% 0.08% 0.11% 0.57% Annualized net loan charge-offs (recoveries) to avg. loans (9) 0.02% 0.04% 0.27% 0.04% 0.03% 0.04% Avg. commercial loan internal risk ratings (8)................ 3.8 3.8 3.9 3.8 3.9 3.9 Avg. loan account balances (10)........ $ 171 162 161 157 149 147 INTEREST RATES AND YIELDS: Loans ............................. 5.98% 5.78% 5.58% 5.25% 5.27% 5.14% Securities.......................... 4.42% 4.44% 4.34% 4.33% 4.00% 4.45% Federal funds sold and other........ 3.90% 3.41% 2.72% 2.50% 2.20% 1.47% Total earning assets................ 5.48% 5.34% 5.12% 4.90% 4.78% 4.73% Total deposits, including non-interest bearing......... 1.80% 1.46% 1.30% 1.22% 1.21% 1.17% Securities sold under agreements to repurchase................... 2.04% 1.60% 0.85% 0.51% 0.26% 0.25% Federal funds purchased and FHLB advances..................... 3.12% 2.61% 2.34% 2.14% 2.08% 2.19% Subordinated debt................... 5.98% 5.32% 4.77% 4.58% 3.54% 3.98% Total deposits and other interest-bearing liabilities.................. 1.98% 1.61% 1.42% 1.33% 1.31% 1.29% PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES SELECTED QUARTERLY FINANCIAL DATA - UNAUDITED ========================================================================================================================= (DOLLARS IN THOUSANDS, JUNE MAR DEC SEPT JUNE MAR EXCEPT PER SHARE DATA) 2005 2005 2004 2004 2004 2004 - ------------------------------------------------------------------------------------------------------------------------- OTHER INFORMATION: Mortgage loan originations Gross loans originated....... $ 27,239 21,360 17,584 22,382 16,061 10,845 Gross fees (11).............. $ 483 364 378 419 266 192 Gross fees as a percentage of mortgage loans originated................. 1.77% 1.70% 2.14% 1.87% 1.66% 1.77% Gains on sales of investment securities, net.............. $ -- 114 -- 109 -- 248 Brokerage account assets, at quarter-end (12)............. $419,000 400,000 398,000 368,000 344,000 351,000 Floating rate loans as a percentage of loans (13)..... 55.9% 55.5% 56.0% 55.8% 52.5% 52.4% Balance of loan participations sold to other banks and serviced by Pinnacle, at quarter end.. $ 64,474 58,844 57,678 53,343 58,530 54,772 Total core deposits to total funding (14).................. 57.3% 58.7% 60.8% 61.8% 59.8% 62.8% Total assets per full-time equivalent employee..................... $ 5,952 5,988 5,960 5,909 5,776 5,695 Annualized revenues per full-time equivalent employee.......... $ 227.0 233.6 246.7 235.6 220.8 222.4 Number of employees (full-time equivalent).................. 146.5 131.5 122.0 116.0 101.5 95.0 Associate retention rate (15)....... 96.6% 99.2% 98.4% 97.4% 97.5% 97.4% - --------------------------- (1) Book value per share computed by dividing total stockholders' equity by common shares outstanding (2) Capital ratios are for Pinnacle Financial Partners, Inc. and are defined as follows: Equity to total assets - End of period total stockholders' equity as a percentage of end of period assets. Leverage - Tier one capital (pursuant to risk-based capital guidelines) as a percentage of adjusted average assets. Tier one risk-based - Tier one capital (pursuant to risk-based capital guidelines) as a percentage of total risk-weighted assets. Total risk-based - Total capital (pursuant to risk-based capital guidelines) as a percentage of total risk-weighted assets. (3) Net interest margin is the result of net interest income on a tax equivalent basis divided by average interest earning assets. (4) Total revenue is equal to the sum of net interest income and noninterest income. (5) Efficiency ratios are calculated by dividing noninterest expense by the sum of net interest income and noninterest income. (6) Growth rates are calculated by dividing amounts for the current quarter by the same quarter of the previous year. (7) During the fourth quarter of 2004, the Company incurred two large commercial charge-offs of approximately $850,000 which had been previously on nonaccruing status. (8) Average risk ratings are based on an internal loan review system which assigns a numeric value of 1 to 10 to all loans to commercial entities based on their underlying risk characteristics as of the end of each quarter. A "1" risk rating is assigned to credits that exhibit Excellent risk characteristics, "2" exhibit Very Good risk characteristics, "3" Good, "4" Satisfactory, "5" Acceptable or Average, "6" Watch List, "7" Criticized, "8" Classified or Substandard, "9" Doubtful and "10" Loss (which are charged-off immediately). Additionally, loans rated "8" or worse are considered potential problem loans. Potential problem loans do not include nonperforming loans. Generally, consumer loans are not subjected to internal risk ratings. (9) Annualized net loan charge-offs to average loans ratios are computed by annualizing year-to-date net loan charge-offs and dividing the result by average loans for the year-to-date period. (10) Computed by dividing the balance of all loans by the number of loan accounts as of the end of each quarter. (11) Amounts are included in the statement of income in "Gains on the sale of loans and loan participations sold". (12) At fair value, based on information obtained from the company's third party broker/dealer for non-FDIC insured financial products and services. (13) Floating rate loans are those loans that are eligible for repricing on a daily basis subject to changes in Pinnacle's prime lending rate or other factors. (14) Core deposits include all transaction deposit accounts, money market and savings accounts and all certificates of deposit issued in a denomination of $100,000 or less. The ratio noted above represents total core deposits divided by total funding, which includes total deposits, FHLB advances, securities sold under agreements to repurchase, subordinated indebtedness and all other interest-bearing liabilities. (15) Associate retention rate is computed by dividing the number of associates employed at quarter-end less the number of associates that have resigned in the last 12 months by the number of associates employed at quarter-end.