Acquisitions (Tables)

12 Months Ended

Dec. 31, 2017

Supplemental Pro Forma Combined Results of Operations

The supplemental proforma information below for the years ended December 31, 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 BNC Merger 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 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.

⁽¹⁾ Net interest income plus noninterest income

Bank of North Carolina [Member]

Business Acquisition [Line Items]

Consideration Paid and 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		$	601,807
Goodwill		1,256,455
		$	1,858,262

Purchase Price Allocations

The acquired assets and liabilities, as well as the adjustments to record the assets and liabilities at their estimated fair values, are presented in the following tables (in thousands):



	As of June 16, 2017
	BNC Historical Cost Basis		Fair Value Adjustments ⁽¹⁾			As Recorded by Pinnacle Financial
Assets
Cash and cash equivalents	$	155,271	$	—		$	155,271
Investment securities	643,875		1,667			645,542
Loans, net of allowance for loan losses ⁽²⁾	5,782,720		(181,430		)	5,601,290
Mortgage loans held for sale	27,026		—			27,026
Other real estate owned ⁽³⁾	20,143		600			20,743
Core deposit and other intangible ⁽⁴⁾	—		50,422			50,422
Property, plant and equipment ⁽⁵⁾	156,805		(3,381		)	153,424
Other assets ⁽⁶⁾	320,988		53,997			374,985
Total Assets	$	7,106,828	$	(78,125	)	$	7,028,703

Liabilities
Interest-bearing deposits ⁽⁷⁾	$	5,003,653	$	4,355		$	5,008,008
Non-interest bearing deposits	1,199,342		—			1,199,342
Borrowings ⁽⁸⁾	183,389		(6,412		)	176,977
Other liabilities ⁽⁹⁾	35,729		6,840			42,569
Total Liabilities	$	6,422,113	$	4,783		$	6,426,896
Net Assets Acquired	$	684,715	$	(82,908	)	$	601,807

Explanation of certain fair value adjustments:


(1)	The amount represents the adjustment of the book value of BNC's assets and liabilities to their estimated fair value on the date of acquisition. Fair value adjustments are updated subsequent to the merger date based on the results of finalized valuation assessments.


(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 2.6% of the 3.1% mark on the acquired loan portfolio.


(3)	Although not complete, this adjustment reflects the Day 1 value of OREO properties subsequently sold.


(4)	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 assets representing the intangible value of customer relationships acquired.


(5)	The amount represents the adjustment of the net book value of BNC's property, plant and equipment to estimated fair value based on market values of similar assets.


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


(7)	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.

(8)

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.


(9)	The amount represents the adjustment to accrue obligations that existed but had not been recorded as of the acquisition date and the fair value of BNC lease obligations.

(dollars in thousands)

Year ended December 31,

Revenue⁽¹⁾

Income before income taxes