Acquisitions (Tables)

6 Months Ended

Jun. 30, 2017

The supplemental proforma information below for the three and six months ended June 30, 2017 and 2016 gives effect to the BNC acquisition as if it had occurred on January 1, 2016. These results combine the historical results of BNC into Pinnacle Financial's consolidated statement of income and, while certain adjustments were made for the estimated impact of certain fair value adjustments, they are not indicative of what would have occurred had the acquisition taken place on the indicated date nor are they intended to represent or be indicative of future results of operations. In particular, no adjustments have been made to eliminate the amount of BNC's provision for credit losses for the first six months of 2016 that may not have been necessary had the acquired loans been recorded at fair value as of the beginning of 2016. Additionally, these financials were not adjusted for non-recurring expenses, such as merger-related charges incurred by either Pinnacle Financial or BNC. Pinnacle Financial expects to achieve operating cost savings and other business synergies as a result of the acquisition which are also not reflected in the proforma amounts.



	Three months ended				Six months ended
	June 30,				June 30,
(dollars in thousands)	2017		2016		2017		2016

Revenue ⁽¹⁾	$	204,172	$	180,436	$	400,407	$	328,384
Income before income taxes	$	90,743	$	66,510	$	163,298	$	127,744

_______________________



⁽¹⁾	Net interest income plus noninterest income.

Avenue Financial Holdings, Inc. (Avenue)

Business Acquisition [Line Items]

Consideration Paid and an Allocation of Purchase Price to Net Assets Acquired

The following summarizes the consideration paid and an allocation of purchase price to net assets acquired (dollars in thousands):



	Number of Shares	Amount
Equity consideration:
Common stock issued	3,760,326	$	182,469
Total equity consideration		$	182,469

Non-equity consideration:
Cash paid to redeem common stock		$	20,910
Cash paid to exchange outstanding stock options		987
Total consideration paid		$	204,366

Allocation of total consideration paid:
Fair value of net assets assumed including identifiable intangible assets		$	81,695
Goodwill		122,671
		$	204,366

Purchase Price Allocations

Pinnacle Financial accounted for the Avenue Merger under the acquisition method in accordance with ASC Topic 805. Accordingly, the purchase price is allocated to the fair value of the assets acquired and liabilities assumed as of the date of merger. Purchase price allocations related to the acquisition of Avenue have been completed and are reflected in the following table (in thousands):



	As of July 1, 2016
	Avenue Historical Cost Basis		Fair Value Adjustments			As Recorded by Pinnacle Financial
Assets
Cash and cash equivalents	$	39,485	$	—		$	39,485
Investment securities ⁽¹⁾	163,862		(463		)	163,399
Loans ⁽²⁾	980,319		(27,789		)	952,530
Mortgage loans held for sale	3,310		—			3,310
Core deposit intangible ⁽³⁾	—		8,845			8,845
Other assets ⁽⁴⁾	47,729		8,774			56,503
Total Assets	$	1,234,705	$	(10,633	)	$	1,224,072

Liabilities
Interest-bearing deposits ⁽⁵⁾	$	741,635	$	1,400		$	743,035
Non-interest bearing deposits	223,685		—			223,685
Borrowings ⁽⁶⁾	142,639		3,240			145,879
Other liabilities	29,719		59			29,778
Total Liabilities	$	1,137,678	$	4,699		$	1,142,377
Net Assets Acquired	$	97,027	$	(15,332	)	$	81,695

Explanation of certain fair value adjustments:


(1)	The amount represents the adjustment of the book value of Avenue's investment securities to their estimated fair value on the date of acquisition.


(2)	The amount represents the adjustment of the net book value of Avenue's loans to their estimated fair value based on interest rates and expected cash flows as of the date of acquisition, which includes estimates of expected credit losses inherent in the portfolio.


(3)	The amount represents the fair value of the core deposit intangible asset representing the intangible value of the deposit base acquired.


(4)	The amount represents the deferred tax asset recognized on the fair value adjustment of Avenue's acquired assets and assumed liabilities as well as the fair value adjustment for property and equipment.


(5)	The amount represents the adjustment necessary because the weighted average interest rate of Avenue's deposits exceeded the cost of similar funding at the time of acquisition. The fair value adjustment will be amortized to reduce future interest expense over the life of the portfolio.


(6)	The amount represents the adjustment necessary because the weighted average interest rate of Avenue's FHLB advances and subordinated debt issuance exceeded the cost of similar funding at the time of acquisition. The fair value adjustment will be amortized to reduce future interest expense over the life of the portfolio.

BNC Bancorp

Business Acquisition [Line Items]

Consideration Paid and an Allocation of Purchase Price to Net Assets Acquired

The following summarizes the consideration paid and presents a preliminary allocation of purchase price to net assets acquired (dollars in thousands):



	Number of Shares	Amount
Equity consideration:
Common stock issued	27,687,100	$	1,858,133
Total equity consideration		$	1,858,133

Non-equity consideration:
Cash paid to redeem common stock		$	129
Total consideration paid		$	1,858,262

Allocation of total consideration paid:
Fair value of net assets assumed including estimated identifiable intangible assets		$	609,068
Goodwill		1,249,194
		$	1,858,262

Purchase Price Allocations



	As of June 16, 2017
	BNC Historical Cost Basis		Preliminary Fair Value Adjustments			As Recorded by Pinnacle Financial
Assets
Cash and cash equivalents	$	155,271	$	—		$	155,271
Investment securities ⁽¹⁾	643,875		1,667			645,542
Loans ⁽²⁾	5,782,720		(175,473		)	5,607,247
Mortgage loans held for sale	27,026		—			27,026
Other real estate owned	20,143		—			20,143
Core deposit intangible ⁽³⁾	—		48,528			48,528
Property, plant and equipment ⁽⁴⁾	156,805		—			156,805
Other assets ⁽⁵⁾	320,988		49,311			370,299
Total Assets	$	7,106,828	$	(75,967	)	$	7,030,861

Liabilities
Interest-bearing deposits ⁽⁶⁾	$	5,003,653	$	4,355		$	5,008,008
Non-interest bearing deposits	1,199,342		—			1,199,342
Borrowings ⁽⁷⁾	183,389		(6,412		)	176,977
Other liabilities	35,729		1,737			37,466
Total Liabilities	$	6,422,113	$	(320	)	$	6,421,793
Net Assets Acquired	$	684,715	$	(75,647	)	$	609,068

Explanation of certain fair value adjustments:


(1)	The amount represents the adjustment of the book value of BNC's investment securities to their estimated fair value on the date of acquisition.


(2)	The amount represents the adjustment of the net book value of BNC's loans to their estimated fair value based on interest rates and expected cash flows as of the date of acquisition, which includes estimates of expected credit losses inherent in the portfolio of approximately 2.5% of the 3% mark on the acquired loan portfolio.


(3)	The amount represents the fair value of the core deposit intangible asset representing the intangible value of the deposit base acquired and the fair value of the customer relationship intangible asset representing the intangible value of customer relationships acquired.


(4)	A fair value adjustment for property and equipment will be recorded, but no estimate is determinable at this time.


(5)	The amount represents the deferred tax asset recognized on the fair value adjustment of BNC's acquired assets and assumed liabilities.


(6)	The amount represents the adjustment necessary because the weighted average interest rate of BNC's deposits exceeded the cost of similar funding at the time of acquisition. The fair value adjustment will be amortized to reduce future interest expense over the life of the portfolio.

(7)

The amount represents the combined adjustment necessary because the weighted average interest rate of BNC's subordinated debt issuance exceeded the cost of similar funding at the time of acquisition and because the weighted average interest rate of BNC's trust preferred securities issuances was lower than the cost of similar funding at the time of acquisition. The combined fair value adjustments will be amortized to increase future interest expense over the lives of the portfolios.