Company Announcements

Excluding non-GAAP adjustments, 4Q20 diluted EPS was $1.58, ROAA was 1.38% and ROTCE was 17.11%

NASHVILLE, Tenn.--(BUSINESS WIRE)--Jan. 19, 2021-- Pinnacle Financial Partners, Inc. (Nasdaq/NGS: PNFP) reported net income per diluted common share of $1.42 for the quarter ended Dec. 31, 2020, compared to net income per diluted common share of $1.26 for the quarter ended Dec. 31, 2019, an increase of 12.7 percent. Excluding gains and losses on the sale of investment securities and ORE expense for the three months ended Dec. 31, 2020 and 2019 and $15.0 million of FHLB restructuring and hedge termination charges for the three months ended Dec. 31, 2020, net income per diluted common share was $1.58 for the three months ended Dec. 31, 2020, compared to $1.27 for the three months ended Dec. 31, 2019, a year-over-year increase of 24.4 percent.

Net income per diluted common share was $4.03 for the year ended Dec. 31, 2020, compared to net income per diluted common share of $5.22 for the year ended Dec. 31, 2019, a decrease of 22.8 percent. Excluding gains and losses on the sale of investment securities and ORE expense for the years ended Dec. 31, 2020 and 2019, $19.8 million of FHLB restructuring and hedge termination charges for the year ended Dec. 31, 2020, and branch rationalization charges and a loss from the sale of Pinnacle Bank's non-prime automobile portfolio for the year ended Dec. 31, 2019, net income per diluted common share was $4.30 in 2020, compared to $5.37 in 2019, a year-over-year decrease of 19.9 percent.

"As we all know, the 2020 operating environment was very challenging," said M. Terry Turner, Pinnacle's president and chief executive officer. "However, the unique commitment our associates possess for this firm and our focus on growing revenue resulted in very strong core performance in the fourth quarter.

"In spite of all the hardships in 2020, we are very pleased to report diluted earnings per share growth over 12 percent (over 24 percent on an adjusted basis) over the fourth quarter of 2019. Additionally, we increased our book value per share by 8.6 percent between Dec. 31, 2020 and Dec. 31, 2019, while tangible book value per share increased 14.8 percent during that same time. Our hiring pipelines continue to grow across our markets as we remain excited about the opportunity to produce outsized earnings and tangible book value per share growth going into 2021."

BALANCE SHEET GROWTH:

• Loans at Dec. 31, 2020 were $22.4 billion, an increase of $2.6 billion from Dec. 31, 2019, reflecting year-over-year growth of 13.3 percent. Loans at Dec. 31, 2020 decreased approximately $52.9 million from Sept. 30, 2020.
  • Loan volumes at Dec. 31, 2020 include approximately $1.8 billion of loans issued through the Small Business Administration’s (SBA’s) Paycheck Protection Program (PPP) during the second quarter of 2020. The average yield on these loans was 4.64 percent for the fourth quarter of 2020, inclusive of $19.4 million of loan fee accretion recognized in the quarter. At Dec. 31, 2020, there were $40.7 million in SBA PPP loan fees remaining, which should be accreted into net interest income through the mid-year 2022 as these loans are repaid and/or are forgiven under the PPP.
    • PPP loans decreased by $452.1 million between the third and fourth quarters of 2020. Excluding PPP loans, total loans increased by $399.2 million during the same period, or 7.9 percent on an annualized basis.
  • Average loans were $22.5 billion for the three months ended Dec. 31, 2020, up $31.5 million from the three months ended Sept. 30, 2020, a linked-quarter annualized growth rate of 0.6 percent. Excluding the impact of $2.1 billion and $2.2 billion of average PPP loans outstanding during the three months ended Dec. 31, 2020 and Sept. 30, 2020, respectively, average loans were $20.4 billion for the three months ended Dec. 31, 2020, up $155.5 million from $20.3 billion for the three months ended Sept. 30, 2020, a linked-quarter annualized growth rate of 3.1 percent.
  • At Dec. 31, 2020, the remaining discount associated with fair value accounting adjustments on acquired loans was $27.8 million, compared to $32.3 million at Sept. 30, 2020.
• Deposits at Dec. 31, 2020 were a record $27.7 billion, an increase of $7.5 billion from Dec. 31, 2019, reflecting year-over-year growth of 37.3 percent. Deposits at Dec. 31, 2020 increased $1.2 billion from Sept. 30, 2020, reflecting a linked-quarter annualized growth rate of 17.5 percent.
  • Average deposits were $27.2 billion for the three months ended Dec. 31, 2020, compared to $26.4 billion for the three months ended Sept. 30, 2020, a linked-quarter annualized growth rate of 12.8 percent.
  • Core deposits were $23.5 billion at Dec. 31, 2020, compared to $17.6 billion at Dec. 31, 2019 and $22.0 billion at Sept. 30, 2020. The linked-quarter annualized growth rate of core deposits in the fourth quarter of 2020 was 27.4 percent.

"We are also very pleased with loan growth during the fourth quarter given the elevated paydowns and liquidity on some of our clients' balance sheets," Turner said. "We are nowhere near returning to pre-pandemic loan growth levels, but it is good to see progress this quarter. We continue to plan for high-single to low double-digit loan growth in 2021, excluding the impact of the PPP program. Having hired 85 new revenue producers in 2019 and 90 in 2020, we believe we are well positioned to grow loans as a result of the new clients we expect these associates will bring to us even in an economy that is likely to offer only limited organic loan demand in the near term.

"Deposit growth in 2020 was phenomenal. We will continue to seek new client deposits for our firm that reduce the level of wholesale funding that we currently deploy. We have initiated numerous deposit gathering tactics over the last two years aimed at core deposit generation and are gaining confidence that these activities will bring strong returns to us in the near future."

PROFITABILITY:

• Return on average assets was 1.24 percent for the fourth quarter of 2020, compared to 1.26 percent for the third quarter of 2020 and 1.38 percent for the fourth quarter of 2019. Fourth quarter 2020 return on average tangible assets amounted to 1.31 percent, compared to 1.33 percent for the third quarter of 2020 and 1.48 percent for the fourth quarter of 2019.
  • Excluding the adjustments described above for both 2020 and 2019, return on average assets was 1.38 percent for the fourth quarter of 2020, compared to 1.28 percent for the third quarter of 2020 and 1.39 percent for the fourth quarter of 2019. Likewise, excluding those same adjustments, the firm’s return on average tangible assets was 1.46 percent for the fourth quarter of 2020, compared to 1.36 percent for the third quarter of 2020 and 1.49 percent for the fourth quarter of 2019.
• Return on average equity for the fourth quarter of 2020 amounted to 8.78 percent, compared to 8.92 percent for the third quarter of 2020 and 8.78 percent for the fourth quarter of 2019. Excluding preferred stockholders' equity for the three months ended Dec. 31, 2020 and Sept. 30, 2020, respectively, return on average common equity for the fourth quarter of 2020 amounted to 9.19 percent, compared to 9.35 percent for the third quarter of 2020 and 8.78 percent for the fourth quarter of 2019. Fourth quarter 2020 return on average tangible common equity amounted to 15.37 percent, compared to 15.85 percent for the third quarter of 2020 and 15.41 percent for the fourth quarter of 2019.
  • Excluding the adjustments described above for both 2020 and 2019, return on average tangible common equity amounted to 17.11 percent for the fourth quarter of 2020, compared to 16.19 percent for the third quarter of 2020 and 15.49 percent for the fourth quarter of 2019.

"We are very excited about our profitability metrics in the fourth quarter," said Harold R. Carpenter, Pinnacle's chief financial officer. "We anticipate and hope for a more stable operating environment in 2021. Our aim for the coming year will be top-quartile peer performance with respect to return on tangible common equity and tangible book value per share growth. As always, we believe we have the right people in the right markets to deliver long-term sustainable growth."

MAINTAINING A STRONG BALANCE SHEET:

• Net charge-offs were $10.8 million for the quarter ended Dec. 31, 2020, compared to $13.1 million for the quarter ended Sept. 30, 2020 and $3.5 million for the quarter ended Dec. 31, 2019. Annualized net charge-offs as a percentage of average loans for the quarter ended Dec. 31, 2020 were 0.19 percent, compared to 0.23 percent for the quarter ended Sept. 30, 2020 and 0.07 percent for the fourth quarter of 2019. Net charge-offs as a percentage of average loans for the year ended Dec. 31, 2020 were 0.18 percent, compared to 0.09 percent for the year ended Dec. 31, 2019.
• Nonperforming assets were 0.38 percent of total loans and ORE at Dec. 31, 2020, compared to 0.40 percent at Sept. 30, 2020 and 0.46 percent at Dec. 31, 2019. Nonperforming assets were $86.2 million at Dec. 31, 2020, compared to $90.8 million at Sept. 30, 2020 and $91.1 million at Dec. 31, 2019.
  • There were $8.0 million of nonperforming assets attributable to the hotel, restaurant, retail and entertainment segments at Dec. 31, 2020, approximately 0.16 percent of these loans.
• The classified asset ratio at Dec. 31, 2020 was 8.1 percent, compared to 9.9 percent at Sept. 30, 2020 and 13.4 percent at Dec. 31, 2019. Classified assets were $262.1 million at Dec. 31, 2020, compared to $307.8 million at Sept. 30, 2020 and $371.3 million at Dec. 31, 2019.
• The allowance for credit losses represented 1.27 percent of total loans at Dec. 31, 2020, compared to 1.28 percent at Sept. 30, 2020 and 0.48 percent at Dec. 31, 2019. Excluding PPP loans, the allowance for credit losses as a percentage of loans was 1.38 percent at Dec. 31, 2020 and 1.43 percent at Sept. 30, 2020.
  • The ratio of the allowance for credit losses to nonperforming loans at Dec. 31, 2020 was 386.1 percent compared to 404.3 percent at Sept. 30, 2020 and 153.8 percent at Dec. 31, 2019.
  • Provision for credit losses was $7.2 million in the fourth quarter of 2020, compared to $16.3 million in the third quarter of 2020 and $4.6 million in the fourth quarter of 2019.

"Credit metrics remained strong all year," Carpenter said. "Our relationship managers and credit officers did significant work in 2020 to evaluate the risk in our loan book, particularly with respect to the various segments within our loan portfolio that we believe have been the most impacted by COVID-19, namely hotel, restaurants, retail and entertainment. During 2020, we regraded substantially all of our commercial loan portfolio. From a credit perspective, our belief is that we are well positioned as we enter 2021. Classified and nonperforming ratios are at the lowest levels in quite some time. We have worked with many borrowers through the modification process with the objective of getting those borrowers through the pandemic. Many of these borrowers operate in the segments most impacted by COVID-19. Each of these relationships has been painstakingly reviewed by our credit officers, modified as necessary and appropriately regraded."

REVENUES:

• Revenues for the quarter ended Dec. 31, 2020 were $304.4 million, an increase of $6.8 million from the $297.7 million recognized in the third quarter of 2020, an annualized growth rate of 9.1 percent. Revenues were up $50.8 million from the fourth quarter of 2019, a year-over-year growth rate of 20.0 percent.
  • Revenue per fully diluted common share was at an all-time record of $4.03 for the three months ended Dec. 31, 2020, compared to $3.95 for the third quarter of 2020 and $3.32 for the fourth quarter of 2019, a 21.4 percent year-over-year growth rate.
• Net interest income for the quarter ended Dec. 31, 2020 was $221.0 million, compared to $206.6 million for the third quarter of 2020 and $194.2 million for the fourth quarter of 2019, a year-over-year growth rate of 13.8 percent. Net interest margin was 2.97 percent for the fourth quarter of 2020, compared to 2.82 percent for the third quarter of 2020 and 3.35 percent for the fourth quarter of 2019.
  • Impacting the firm’s net interest income and net interest margin in the third and fourth quarters of 2020 was both the PPP and the firm’s maintenance of additional on-balance sheet liquidity as a result of the pandemic. Average PPP loans outstanding during the fourth quarter of 2020 were $2.1 billion. Additionally, the firm also maintained approximately $3.0 billion in average excess liquidity, primarily in Federal funds sold and other cash equivalent balances. The firm's fourth quarter 2020 net interest margin was negatively impacted by approximately 30 basis points as a result of PPP loans and excess liquidity, compared to approximately 40 basis points in the third quarter of 2020.
  • Included in net interest income for the fourth quarter of 2020 was $4.4 million of discount accretion associated with fair value adjustments, compared to $5.6 million of discount accretion recognized in the third quarter of 2020 and $10.6 million in the fourth quarter of 2019. The firm's net interest margin was positively impacted by approximately 6 basis points, 9 basis points and 19 basis points, respectively, because of fair value adjustment discount accretion in each of the fourth and third quarters of 2020 and the fourth quarter of 2019. There remains $20.8 million of purchase accounting discount accretion as of Dec. 31, 2020.
• Noninterest income for the quarter ended Dec. 31, 2020 was $83.4 million, compared to $91.1 million for the quarter ended Sept. 30, 2020, a linked-quarter annualized decline of 33.5 percent. Compared to $59.5 million for the fourth quarter of 2019, noninterest income grew 40.3 percent year-over-year.
  • Wealth management revenues, which include investment, trust and insurance services, were $14.3 million for the fourth quarter of 2020, compared to $13.0 million for the third quarter of 2020 and $12.4 million for the fourth quarter of 2019, a year-over-year increase of 14.8 percent.
  • Income from the firm's investment in BHG was $24.3 million for the quarter ended Dec. 31, 2020, down from $26.4 million for the quarter ended Sept. 30, 2020 and up from $12.3 million for the quarter ended Dec. 31, 2019.
  • Net gains on mortgage loans sold were $12.4 million during the quarter ended Dec. 31, 2020, down from $19.5 million for the quarter ended Sept. 30, 2020. Net gains on mortgage loans sold were up 104.9 percent from $6.0 million during the quarter ended Dec. 31, 2019. This dramatic year-over-year growth primarily reflects market conditions as well as the addition of revenue producing mortgage originators over the last 24 months.
  • Other noninterest income was $24.0 million for the quarter ended Dec. 31, 2020, compared to $21.7 million for the quarter ended Sept. 30, 2020 and $19.5 million for the quarter ended Dec. 31, 2019, a year-over-year increase of 23.0 percent. Contributing to the year-over-year growth were increases in SBA loan fees, loan swap fees and policy benefits from the firm's bank-owned life insurance policies.

"We are reporting a net interest margin for the fourth quarter of 2.97 percent, which was negatively impacted by approximately 0.30 percent because of PPP loans and our excess liquidity," Carpenter said. "These items will continue to impact our reported return on assets, net interest margin and other profitability measures, but eventually their impact will diminish. Earning asset yields increased in the fourth quarter while deposit costs continued to decrease. Our average deposit costs were 0.33 percent in the fourth quarter, down 10 basis points from the third quarter. Our focus in 2021 will continue to be reducing our future deposit costs for both client and wholesale funding sources. We also anticipate that our liquidity levels will find their way to historical balance sheet liquidity levels over the next two years.

"With a year-over-year increase of approximately 40.0 percent, it was obviously a big growth year for fees. Several business units reported record results, led by a very robust mortgage market and BHG maintaining its strong performance throughout the pandemic. We also achieved double-digit growth in areas like our wealth management and SBA units. Looking forward, we are optimistic that BHG will have another great year in 2021 as their business flows are strong headed into the first quarter of 2021. We believe we also have a great hiring platform with more mortgage originators than ever and we operate in very attractive housing markets. Although we expect a modest decrease in mortgage revenues given our belief that long-term rates may increase in 2021, we do anticipate strong growth in total fee revenues in 2021."

OPERATING LEVERAGE AND OTHER HIGHLIGHTS:

• The firm's efficiency ratio for the fourth quarter of 2020 was 53.6 percent, compared to 48.5 percent for the third quarter of 2020 and 51.4 percent in the fourth quarter of 2019. The ratio of noninterest expenses to average assets was 1.89 percent for the fourth quarter of 2020, compared to 1.70 percent in the third quarter of 2020 and 1.88 percent in the fourth quarter of 2019.
  • Excluding the adjustments described above for both 2020 and 2019, the efficiency ratio was 48.2 percent for the fourth quarter of 2020, compared to 47.3 percent for the third quarter of 2020 and 51.1 percent for the fourth quarter of 2019. Excluding ORE expense for 2020 and 2019 and FHLB restructuring and hedge termination charges for 2020, the ratio of noninterest expense to average assets was 1.70 percent for the fourth quarter of 2020, compared to 1.65 percent for the third quarter of 2020 and 1.86 percent for the fourth quarter of 2019.
• Noninterest expense for the quarter ended Dec. 31, 2020 was $163.3 million, compared to $144.3 million in the third quarter of 2020 and $130.5 million in the fourth quarter of 2019, reflecting a year-over-year increase of 25.2 percent. Excluding ORE expense for 2020 and 2019 and FHLB restructuring and hedge termination charges for 2020, noninterest expense for the fourth quarter of 2020 increased 13.3 percent over the fourth quarter of 2019.
  • Salaries and employee benefits were $90.0 million in the fourth quarter of 2020, compared to $90.1 million in the third quarter of 2020 and $81.4 million in the fourth quarter of 2019, reflecting a year-over-year increase of 10.5 percent.
    • Incentive costs related to the firm’s annual cash incentive plan amounted to approximately $13.4 million in the fourth quarter of 2020, compared to $15.2 million in the third quarter of 2020 and $10.9 million in the fourth quarter of last year. Costs related to the firm’s annual cash incentive plan for the year ended December 31, 2020 are approximately 27 percent less than the costs of the plan in 2019. As a result of the firm’s performance in 2020, the threshold for the plan’s diluted EPS target was not met and thus resulted in a significant reduction in costs related to the plan. Early in the third quarter, the Company added an additional metric to the annual cash incentive plan to take into account new PPNR goals and initiatives for 2020. Based on the firm's results for the fiscal year ended 2020 and in consideration of the considerable effort the Company’s associates put forth during unusually difficult circumstances in 2020, the Company's compensation committee approved an increase in the calculated award from 50 percent of target to 65 percent of target, which amounted to $6.8 million of additional expense in the fourth quarter of 2020.
    • Incentive costs related to the Company’s equity compensation plans amounted to approximately $4.6 million in the fourth quarter of 2020, compared to $4.4 million in the third quarter of 2020 and $6.1 million in the fourth quarter of last year. As was the case with the diluted EPS metric under the annual cash incentive plan, the Company did not meet its 2020 performance targets under its performance-based equity incentive plans for its named executive officers which resulted in the forfeiture of several tranches of performance-based awards granted to these individuals. These forfeitures contributed to the reduction in 2020 costs related to these plans.
  • During the fourth quarter of 2020 and included in other noninterest expense, the firm prepaid $200.0 million in FHLB advances with a weighted average rate of 2.09 percent and a remaining weighted average term of 3.1 years resulting in $10.3 million of prepayment penalties that were recognized during the quarter. Additionally, the firm eliminated $99.0 million of cash flow hedges designed to hedge forecasted wholesale funding cash flows which the firm no longer deems likely to occur. The cash flow hedges were originally intended to remain in effect through various dates until Oct. 3, 2022. The firm recognized $4.7 million in expense in the fourth quarter of 2020 as a result of these early terminations.
• The effective tax rate for the fourth quarter of 2020 was 17.2 percent, compared to 19.3 percent for the third quarter of 2020 and 18.9 percent for the fourth quarter of 2019.
  • Contributing to the reduction in the effective tax rate in the fourth quarter of 2020 was an increase in policy benefits from the firm's bank-owned life insurance policies and an increase in tax-exempt interest income. The effective tax rate for the year ended Dec. 31, 2020 was 15.9 percent. The firm believes the effective tax rate for 2021 will increase modestly primarily due to increased performance next year.

"Expenses in the fourth quarter of 2020 were higher than anticipated due primarily to the compensation committee's decision to increase the annual cash incentive plan award from 50 percent of target to 65 percent," Carpenter said. "Given the significant effort of our associates in 2020, our board's compensation committee determined a modest increase in the award was warranted. For 2021, the performance targets for our annual cash plan are likely to be similar to our original targets in 2020 in that they will be designed to achieve top quartile performance within our peer group. As we consider expense run rates for 2021, with the expected increase in incentive costs, our belief is that our 2021 expense growth will result in a high-single digit percentage increase in comparison to total noninterest expense for 2020."

BOARD OF DIRECTORS DECLARES DIVIDENDS AND AUTHORIZE SHARE REPURCHASE PLAN

On Jan. 19, 2021, Pinnacle Financial's Board of Directors increased the quarterly cash dividend to $0.18 per common share to be paid on Feb. 26, 2021 to common shareholders of record as of the close of business on Feb. 5, 2021. Additionally, the board of directors approved a quarterly dividend of approximately $3.8 million, or $16.88 per share (or $0.422 per depositary share), on Pinnacle Financial's 6.75 percent Series B Non-Cumulative Perpetual Preferred Stock payable on March 1, 2021 to shareholders of record at the close of business on Feb. 14, 2021. The amount and timing of any future dividend payments to both preferred and common shareholders will be subject to the approval of Pinnacle's Board of Directors.

The firm also announced that its board of directors has authorized a new share repurchase plan for up to $125 million of the Company’s common stock. Repurchases of the Company’s common stock will be made in accordance with applicable laws and may be made at management’s discretion from time to time in the open market, through privately negotiated transactions or otherwise. The board authorized the repurchase program to remain in effect through March 31, 2022, unless the entire repurchase amount has been acquired before that date.

The share repurchase program may be extended, modified, amended, suspended or discontinued at any time at the Company’s discretion and does not commit the Company to repurchase shares of its common stock. The actual timing, number and value of the shares to be purchased under the program will be determined by the Company at its discretion and will depend on a number of factors, including the performance of the Company’s stock price, the Company’s ongoing capital planning considerations, general market and other conditions, applicable legal requirements and compliance with the terms of the Company’s outstanding indebtedness.

WEBCAST AND CONFERENCE CALL INFORMATION

Pinnacle will host a webcast and conference call at 8:30 a.m. CT on Jan. 20, 2021, to discuss fourth quarter 2020 results and other matters. To access the call for audio only, please call 1-877-602-7944. For the presentation and streaming audio, please access the webcast on the investor relations page of Pinnacle's website at www.pnfp.com.

For those unable to participate in the webcast, it will be archived on the investor relations page of Pinnacle's website at www.pnfp.com for 90 days following the presentation.

Pinnacle Financial Partners provides a full range of banking, investment, trust, mortgage and insurance products and services designed for businesses and their owners and individuals interested in a comprehensive relationship with their financial institution. The firm is the No. 1 bank in the Nashville-Murfreesboro-Franklin MSA, according to 2020 deposit data from the FDIC. Pinnacle earned a spot on FORTUNE's 2020 list of 100 Best Companies to Work For® in the U.S., its fourth consecutive appearance. American Banker recognized Pinnacle as one of America’s Best Banks to Work For seven years in a row.

Pinnacle owns a 49 percent interest in Bankers Healthcare Group (BHG), which provides innovative, hassle-free financial solutions to healthcare practitioners and other licensed professionals. Great Place to Work and FORTUNE ranked BHG No. 1 on its 2020 list of Best Workplaces in New York State in the small/medium business category.

The firm began operations in a single location in downtown Nashville, TN in October 2000 and has since grown to approximately $34.9 billion in assets as of Dec. 31, 2020. As the second-largest bank holding company headquartered in Tennessee, Pinnacle operates in 12 primarily urban markets in Tennessee, the Carolinas, Virginia and Atlanta.

Additional information concerning Pinnacle, which is included in the Nasdaq Financial-100 Index, can be accessed at www.pnfp.com.

Forward-Looking Statements

All statements, other than statements of historical fact, included in this press release, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words "expect," "anticipate," "intend," "may," "should," "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 statements. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause the actual results to differ materially from the statements, including, but not limited to: (i) further deterioration in the financial condition of borrowers of Pinnacle Bank and its subsidiaries or BHG resulting in significant increases in loan losses and provisions for those losses and, in the case of BHG, substitutions; (ii) the further effects of the emergence of widespread health emergencies or pandemics, including the magnitude and duration of the COVID-19 pandemic and its impact on general economic and financial market conditions and on Pinnacle Financial's and its customers' business, results of operations, asset quality and financial condition; (iii) the speed with which the COVID-19 vaccines can be widely distributed, those vaccines efficacy against the virus and public acceptance of the vaccines; (iv) the ability to grow and retain low-cost core deposits and retain large, uninsured deposits, including during times when Pinnacle Bank is seeking to lower rates it pays on deposits; (v) the inability of Pinnacle Financial, or entities in which it has significant investments, like BHG, to maintain the long-term historical growth rate of its, or such entities', loan portfolio; (vi) changes in loan underwriting, credit review or loss reserve policies associated with economic conditions, examination conclusions, or regulatory developments; (vii) effectiveness of Pinnacle Financial's asset management activities in improving, resolving or liquidating lower-quality assets; (viii) the impact of competition with other financial institutions, including pricing pressures and the resulting impact on Pinnacle Financial’s results, including as a result of compression to net interest margin; (ix) adverse conditions in the national or local economies including in Pinnacle Financial's markets throughout Tennessee, North Carolina, South Carolina, Georgia and Virginia, particularly in commercial and residential real estate markets; (x) fluctuations or differences in interest rates on loans or deposits from those that Pinnacle Financial is modeling or anticipating, including as a result of Pinnacle Bank's inability to better match deposit rates with the changes in the short-term rate environment, or that affect the yield curve; (xi) the results of regulatory examinations; (xii) Pinnacle Financial's ability to identify potential candidates for, consummate, and achieve synergies from, potential future acquisitions; (xiii) difficulties and delays in integrating acquired businesses or fully realizing costs savings and other benefits from acquisitions; (xiv) BHG's ability to profitably grow its business and successfully execute on its business plans; (xv) risks of expansion into new geographic or product markets; (xvi) any matter that would cause Pinnacle Financial to conclude that there was impairment of any asset, including goodwill or other intangible assets; (xvii) the ineffectiveness of Pinnacle Bank's hedging strategies, or the unexpected counterparty failure or hedge failure of the underlying hedges; (xviii) reduced ability to attract additional financial advisors (or failure of such advisors to cause their clients to switch to Pinnacle Bank), to retain financial advisors (including as a result of the competitive environment for associates) or otherwise to attract customers from other financial institutions; (xix) deterioration in the valuation of other real estate owned and increased expenses associated therewith; (xx) inability to comply with regulatory capital requirements, including those resulting from changes to capital calculation methodologies, required capital maintenance levels or regulatory requests or directives, particularly if Pinnacle Bank's level of applicable commercial real estate loans were to exceed percentage levels of total capital in guidelines recommended by its regulators; (xxi) approval of the declaration of any dividend by Pinnacle Financial's board of directors; (xxii) the vulnerability of Pinnacle Bank's network and online banking portals, and the systems of parties with whom Pinnacle Bank contracts, to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss and other security breaches; (xxiii) the possibility of increased compliance and operational costs as a result of increased regulatory oversight (including by the Consumer Financial Protection Bureau), including oversight of companies in which Pinnacle Financial or Pinnacle Bank have significant investments, like BHG, and the development of additional banking products for Pinnacle Bank's corporate and consumer clients; (xxiv) the risks associated with Pinnacle Financial and Pinnacle Bank being a minority investor in BHG, including the risk that the owners of a majority of the equity interests in BHG decide to sell the company if not prohibited from doing so by Pinnacle Financial or Pinnacle Bank; (xxv) changes in state and federal legislation, regulations or policies applicable to banks and other financial service providers, like BHG, including regulatory or legislative developments; (xxvi) the availability of and access to capital; (xxvii) adverse results (including costs, fines, reputational harm, inability to obtain necessary approvals and/or other negative effects) from current or future litigation, regulatory examinations or other legal and/or regulatory actions, including as a result of Pinnacle Bank's participation in and execution of government programs related to the COVID-19 pandemic; and (xxviii) general competitive, economic, political and market conditions. Additional factors which could affect the forward looking statements can be found in Pinnacle Financial's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K filed with the SEC and available on the SEC's website at http://www.sec.gov. Pinnacle Financial disclaims any obligation to update or revise any forward-looking statements contained in this press release, which speak only as of the date hereof, whether as a result of new information, future events or otherwise.

Non-GAAP Financial Matters

This release contains certain non-GAAP financial measures, including, without limitation, earnings per diluted common share, efficiency ratio, adjusted PPNR and the ratio of noninterest expense to average assets, excluding in certain instances the impact of expenses related to other real estate owned, gains or losses on sale of investment securities, the charges associated with Pinnacle Financial's branch rationalization project, FHLB restructuring charges, hedge termination charges, the sale of the remaining portion of Pinnacle Bank's non-prime automobile portfolio and other matters for the accounting periods presented. This release also includes non-GAAP financial measures which exclude the impact of loans originated under the PPP. This release may also contain certain other non-GAAP capital ratios and performance measures that exclude the impact of goodwill and core deposit intangibles associated with Pinnacle Financial's acquisitions of BNC, Avenue Bank, Magna Bank, CapitalMark Bank & Trust, Mid-America Bancshares, Inc., Cavalry Bancorp, Inc. and other acquisitions which collectively are less material to the non-GAAP measure as well as the impact of Pinnacle Financial's Series B Preferred Stock. The presentation of the non-GAAP financial information is not intended to be considered in isolation or as a substitute for any measure prepared in accordance with GAAP. Because non-GAAP financial measures presented in this release are not measurements determined in accordance with GAAP and are susceptible to varying calculations, these non-GAAP financial measures, as presented, may not be comparable to other similarly titled measures presented by other companies.

Pinnacle Financial believes that these non-GAAP financial measures facilitate making period-to-period comparisons and are meaningful indications of its operating performance. In addition, because intangible assets such as goodwill and the core deposit intangible, and the other items excluded each vary extensively from company to company, Pinnacle Financial believes that the presentation of this information allows investors to more easily compare Pinnacle Financial's results to the results of other companies. Pinnacle Financial's management utilizes this non-GAAP financial information to compare Pinnacle Financial's operating performance for 2020 versus certain periods in 2019 and to internally prepared projections.