Add
PNFP to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| PNFP > SEC Filings for PNFP > Form 10-Q on 3-Aug-2009 | All Recent SEC Filings |
3-Aug-2009
Quarterly Report
Net loss available to common stockholders for the second quarter of 2009 was
$33.2 million compared to net income available to common stockholders of
$8.0 million for the same period in 2008, a decrease of 517.6%. Net loss for the
first six months of 2009 was $32.6 million compared to net income available to
common stockholders of $14.0 million for the same period in 2008, a decrease of
332.4%. Included in net loss available to common stockholders for the three and
six months ended June 30, 2009 was approximately $1.47 million and $2.92 million
of charges related to preferred stock dividends and accretion of the preferred
stock discount related to our participation in the U.S. Department of Treasury's
Capital Purchase Program (the "CPP").
Financial Condition. Loans increased $189.3 million during the first six months
of 2009. We have grown our total deposits to $3.761 billion at June 30, 2009
compared to $3.533 billion at December 31, 2008, an increase of $228.2 million.
In comparing the composition of the average balances of our deposits between the
second quarter of 2009 with the second quarter of 2008, we have experienced
increased growth in our higher cost certificate of deposit balances than in any
other category. This increase in reliance on higher cost deposits has
contributed to a reduced net interest margin between the two periods.
Capital and Liquidity. At June 30, 2009, our capital ratios, including our
bank's capital ratios, met regulatory minimum capital requirements.
Additionally, at June 30, 2009, our bank would be considered to be
"well-capitalized" pursuant to banking regulations. As our bank grows it may
require additional capital from us over that which can be earned through
operations. We anticipate that we will continue to use various capital raising
techniques in order to support the growth of our bank.
During 2008, we increased our capital accounts through our participation in the
CPP. As a result of our participation in the CPP, we issued 95,000 shares of
preferred stock for $95 million. Additionally, we issued 534,910 common stock
warrants to the U.S. Treasury as a condition to our participation in the CPP.
The warrants have an exercise price of $26.64 each, are immediately exercisable
and expire 10 years from the date of issuance. The common stock warrants have
been assigned a fair value of $6.7 million, as of December 12, 2008. As a
result, $6.7 million has been recorded as the discount on the preferred stock
issued in the CPP which will be accreted as a reduction in net income available
to common stockholders over the next five years at approximately $1.1 million to
$1.3 million per year. The resulting $88.3 million has been assigned to the
Series A preferred stock issued in the CPP and will be accreted up to the
redemption amount of $95 million over the next five years.
On June 16, 2009, we issued 8,855,000 shares through a public offering of our
common stock resulting in net proceeds to us of approximately $109.0 million. As
a result, and pursuant to the terms of the warrant issued to the U.S. Treasury
in connection with our participant in the CPP, the number of shares issuable
upon exercise of the warrant issued to the U.S. Treasury in connection with the
CPP was reduced by 50%, or 267,455 shares. Additionally, during the third
quarter of 2008, we sold 1.0 million shares of our common stock for
$21.5 million which also increased our capital accounts. As of June 30, 2009, we
believe we have sufficient capital to support our current growth plans. However,
expansion by acquisition of other banks or by branching into a new geographic
market, or significant reductions in our capital, could result in issuance of
additional capital, including additional common shares.
Critical Accounting Estimates
The accounting principles we follow and our methods of applying these principles
conform with U.S. generally accepted accounting principles and with general
practices within the banking industry. In connection with the application of
those principles, we have made judgments and estimates which, in the case of the
determination of our allowance for loan losses and the assessment of impairment
of the intangibles resulting from our mergers with Mid-America Bancshares, Inc.
("Mid-America") in 2007 and Cavalry Bancorp, Inc. ("Cavalry") in 2006 have been
critical to the determination of our financial position and results of
operations.
Allowance for Loan Losses ("allowance"). Our management assesses the adequacy of
the allowance prior to the end of each calendar quarter. This assessment
includes procedures to estimate the allowance and test the adequacy and
appropriateness of the resulting balance. The level of the allowance is based
upon management's evaluation of the loan portfolios, past loan loss experience,
current asset quality trends, known and inherent risks in the portfolio, adverse
situations that may affect the borrower's ability to repay (including the timing
of future payment), the estimated value of any underlying collateral,
composition of the loan portfolio, economic conditions, industry and peer bank
loan quality indications and other pertinent factors, including regulatory
recommendations. This evaluation is inherently subjective as it requires
material estimates including the amounts and timing of future cash flows
expected to be received on impaired loans that may be susceptible to significant
change. Loan losses are charged off when management believes that the full
collectability of the loan is unlikely. A loan may be partially charged-off
after a "confirming event" has occurred which serves to validate that full
repayment pursuant to the terms of the loan is unlikely. Allocation of the
allowance may be made for specific loans, but the entire allowance is available
for any loan that, in management's judgment, is deemed to be uncollectible.
Larger balance commercial and commercial real estate loans are impaired when,
based on current information and events, it is probable that we will be unable
to collect all amounts due according to the contractual terms of the loan
agreement. Collection of all amounts due according to the contractual terms
means that both the interest and principal payments of a loan will be collected
as scheduled in the loan agreement.
An impairment allowance is recognized if the fair value of the loan is less than
the recorded investment in the loan (recorded investment in the loan is the
principal balance plus any accrued interest, net of deferred loan fees or costs
and unamortized premium or discount). The impairment is recognized through the
allowance. Loans that are impaired are recorded at the present value of expected
future cash flows discounted at the loan's effective interest rate, or if the
loan is collateral dependent, impairment measurement is based on the fair value
of the collateral, less estimated disposal costs. Management believes it follows
appropriate accounting and regulatory guidance in determining impairment and
accrual status of impaired loans.
The level of allowance maintained is believed by management to be adequate to
absorb probable losses inherent in the portfolio at the balance sheet date. The
allowance is increased by provisions charged to expense and decreased by
charge-offs, net of recoveries of amounts previously charged-off.
In assessing the adequacy of the allowance, we also consider the results of our
ongoing independent loan review process. We undertake this process both to
ascertain whether there are loans in the portfolio whose credit quality has
weakened over time and to assist in our overall evaluation of the risk
characteristics of the entire loan portfolio. Our loan review process includes
the judgment of management, the input from our independent loan reviewers, and
reviews that may have been conducted by bank regulatory agencies as part of
their usual examination process. We incorporate loan review results in the
determination of whether or not it is probable that we will be able to collect
all amounts due according to the contractual terms of a loan.
As part of management's quarterly assessment of the allowance, management
divides the loan portfolio into four segments: commercial, commercial real
estate, consumer and consumer real estate. Each segment is then analyzed such
that an allocation of the allowance is estimated for each loan segment.
The allowance allocation for commercial and commercial real estate loans begins
with a process of estimating the probable losses inherent for these types of
loans. The estimates for these loans are established by category and based on
our internal system of credit risk ratings and historical loss data. The
estimated loan loss allocation rate for our internal system of credit risk
grades for commercial and commercial real estate loans is based on management's
experience with similarly graded loans, discussions with banking regulators and
industry loss factors. Beginning in 2008, we also performed a migration analysis
of all loans that were charged-off during the previous two years. A migration
analysis assists in evaluating loan loss allocation rates for the various risk
grades assigned to loans in our portfolio. We incorporated the migration
analysis along with other factors to determine the loss allocation rates for the
commercial and commercial real estate portfolios. Subsequently, we weighted the
allocation methodologies for the commercial and commercial real estate
portfolios and determined a weighted average allocation for these portfolios.
The allowance allocation for consumer and consumer real estate loans which
includes installment, home equity, consumer mortgages, automobiles and others is
established for each of the categories by estimating probable losses inherent in
that particular category of consumer and consumer real estate loans. The
estimated loan loss allocation rate for each category is based on management's
experience, discussions with banking regulators, consideration of our actual
loss rates, industry loss rates and loss rates of various peer bank groups.
Consumer and consumer real estate loans are evaluated as a group by category
(i.e. retail real estate, installment, etc.) rather than on an individual loan
basis because these loans are smaller and homogeneous. We weight the allocation
methodologies for the consumer and consumer real estate portfolios and determine
a weighted average allocation for these portfolios.
The estimated loan loss allocation for all four loan portfolio segments is then
adjusted for management's estimate of probable losses for several
"environmental" factors. The allocation for environmental factors is
particularly subjective and does not lend itself to exact mathematical
calculation. This amount represents estimated probable inherent credit losses
which exist, but have not yet been identified, as of the balance sheet date, and
are based upon quarterly trend assessments in delinquent and nonaccrual loans,
unanticipated charge-offs, credit concentration changes, prevailing economic
conditions, changes in lending personnel experience, changes in lending policies
or procedures and other influencing factors. These environmental factors are
considered for each of the four loan segments and the allowance allocation, as
determined by the processes noted above for each component, is increased or
decreased based on the incremental assessment of these various "environmental"
factors.
The assessment also includes an unallocated component. We believe that the
unallocated amount is warranted for inherent factors that cannot be practically
assigned to individual loan categories. An example is the imprecision in the
overall measurement process, in particular the volatility of the national and
local economy.
We then test the resulting allowance by comparing the balance in the allowance
to historical trends and industry and peer information. Our management then
evaluates the result of the procedures performed, including the result of our
testing, and concludes on the appropriateness of the balance of the allowance in
its entirety. The audit committee of our board of directors reviews and approves
the assessment prior to the filing of quarterly and annual financial
information.
Impairment of Intangible Assets -Long-lived assets, including purchased
intangible assets subject to amortization, such as our core deposit intangible
asset, are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the
carrying amount of an asset to estimated undiscounted future cash flows expected
to be generated by the asset. If the carrying amount of an asset exceeds its
estimated future cash flows, an impairment charge is recognized by the amount by
which the carrying amount of the asset exceeds the fair value of the asset.
Assets to be disposed of would be separately presented in the balance sheet and
reported at the lower of the carrying amount or fair value less costs to sell,
and are no longer depreciated.
Goodwill and intangible assets that have indefinite useful lives are evaluated
for impairment annually and are evaluated for impairment more frequently if
events and circumstances indicate that the asset might be impaired. That annual
assessment date is September 30. An impairment loss is recognized to the extent
that the carrying amount exceeds the asset's fair value. The goodwill impairment
analysis is a two-step test. The first step, used to identify potential
impairment, involves comparing each reporting unit's estimated fair value to its
carrying value, including goodwill. If the estimated fair value of a reporting
unit exceeds its carrying value, goodwill is considered not to be impaired. If
the carrying value exceeds estimated fair value, there is an indication of
potential impairment and the second step is performed to measure the amount of
impairment.
If required, the second step involves calculating an implied fair value of
goodwill for each reporting unit for which the first step indicated potential
impairment. The implied fair value of goodwill is determined in a manner similar
to the amount of goodwill calculated in a business combination, by measuring the
excess of the estimated fair value of the reporting unit, as determined in the
first step, over the aggregate estimated fair values of the individual assets,
liabilities and identifiable intangibles as if the reporting unit was being
acquired in a business combination. If the implied fair value of goodwill
exceeds the carrying value of goodwill assigned to the reporting unit, there is
no impairment. If the carrying value of goodwill assigned to a reporting unit
exceeds the implied fair value of the goodwill, an impairment charge is recorded
for the excess. An impairment loss cannot exceed the carrying value of goodwill
assigned to a reporting unit, and the loss establishes a new basis in the
goodwill.
Our stock price has historically traded above its book value per common share
and tangible book value per common share. At June 30, 2009, our stock price was
trading below its book value per common share, but above its tangible book value
per common share. We performed an evaluation of whether there were indications
of potential goodwill impairment as of June 30, 2009. The results of our
evaluation determined that there was no indication of potential impairment of
goodwill at June 30, 2009. However, should our future earnings and cash flows
decline and/or discount rates increase, or there is a significant decline in our
stock price below book value, an impairment charge to goodwill and other
intangible assets may also be required.
Results of Operations
The following is a summary of our results of operations (dollars in thousands):
2009-2008 2009-2008
Three months ended Percent Six months ended Percent
June 30, Increase June 30, Increase
2009 2008 (Decrease) 2009 2008 (Decrease)
Interest income $ 50,028 $ 48,774 2.6 % $ 99,547 $ 100,935 (1.4 %)
Interest expense 19,516 21,092 (7.5 %) 40,334 45,894 (12.1 %)
Net interest income 30,512 27,682 10.2 % 59,213 55,041 7.6 %
Provision for loan
losses 65,320 2,787 2,243.7 % 78,930 4,378 1,702.9 %
Net interest income
(loss) after provision
for loan losses (34,808 ) 24,895 (239.8 %) (19,717 ) 50,663 (138.9 %)
Noninterest income 10,602 9,058 17.0 % 23,738 17,426 36.2 %
Noninterest expense 30,606 23,075 32.6 % 55,850 48,567 15.0 %
Net income before
income taxes (54,812 ) 10,878 (603.9 %) (51,829 ) 19,522 (365.5 %)
Income tax expense
(benefit) (23,036 ) 2,917 (889.7 %) (22,143 ) 5,496 (502.9 %)
Net income (loss) (31,776 ) 7,961 (499.1 %) (29,686 ) 14,026 (311.6 %)
Preferred dividends
and preferred stock
discount accretion 1,470 - 2,917 -
Net income
(loss) available to
common stockholders $ (33,246 ) $ 7,961 (517.6 %) $ (32,603 ) $ 14,026 (332.4 %)
Basic net income
(loss) per common
share available to
common stockholders $ (1.33 ) $ 0.36 (469.4 %) $ (1.34 ) $ 0.63 (312.7 %)
Diluted net
income(loss) per
common share available
to common stockholders $ (1.33 ) $ 0.34 (491.2 %) $ (1.34 ) $ 0.60 (323.3 %)
|
Net Interest Income. Net interest income represents the amount by which interest earned on various earning assets exceeds interest paid on deposits and other interest bearing liabilities and is one of the most significant components of our results of operations. For the three months ended June 30, 2009 and 2008, we recorded net interest income of $30.5 million and $27.7 million respectively, which resulted in a net interest margin of 2.75% and 3.24%. For the six months ended June 30, 2009 and 2008, we recorded net interest income of $59.2 million and $55.0 million respectively, which resulted in a net interest margin of 2.74% and 3.27%.
The following tables set forth the amount of our average balances, interest income or interest expense for each category of interest-earning assets and interest-bearing liabilities and the average interest rate for interest-earning assets and interest-bearing liabilities, net interest spread and net interest margin for the three and six months ended June 30, 2009 and 2008 (dollars in thousands):
Three months ended Three months ended
June 30, 2009 June 30, 2008
Average Rates/ Average Rates/
Balances Interest Yields Balances Interest Yields
Interest-earning
assets:
Loans $ 3,517,254 $ 39,627 4.52 % $ 2,941,973 $ 42,228 5.77 %
Securities:
Taxable 752,302 8,393 4.47 % 380,733 4,792 5.06 %
Tax-exempt (1) 159,890 1,573 5.21 % 136,216 1,340 4.22 %
Federal funds sold
and other 93,557 435 2.01 % 41,931 414 4.42 %
Total
interest-earning
assets 4,523,003 $ 50,028 4.49 % 3,500,853 48,744 5.66 %
Nonearning assets
Intangible assets 259,954 259,217
Other nonearning
assets 218,532 153,449
Total assets $ 5,001,489 $ 3,913,519
Interest-bearing
liabilities:
Interest bearing
deposits
Interest checking $ 359,330 $ 469 0.52 % $ 379,714 $ 1,339 1.42 %
Savings and money
market 774,255 2,415 1.25 % 702,933 2,722 1.56 %
Time 2,146,495 13,536 2.53 % 1,466,685 13,658 3.75 %
Total interest
bearing deposits 3,280,080 16,420 2.01 % 2,549,332 17,719 2.80 %
Securities sold under
agreements to
repurchase 243,765 423 0.70 % 174,847 567 1.30 %
Federal Home Loan
Bank advances and
. . .
|
|
|