<PAGE>
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 29549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTERLY PERIOD ENDED JUNE 30, 1998
Commission File Number 33-67528
PINNACLE FINANCIAL CORPORATION
- -----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Georgia 58-1538862
- ------------------------------- ----------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization
884 Elbert Street,
P.O. Box 430, Elberton, Georgia 30635-0430
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (706) 283-2854
--------------
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
AS OF JULY 31, 1998 THERE WERE 768,000 SHARES OF COMMON STOCK
OUTSTANDING.<PAGE>
PINNACLE FINANCIAL CORPORATION
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Position at
June 30, 1998 and December 31, 1997 1
Consolidated Statements of Income for the Three
Months ended June 30, 1998 and 1997 2
Consolidated Statements of Income for the Six
Months ended June 30, 1998 and 1997 3
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1998 and 1997 4
Item 2. Managements Discussion and Analysis or Plan of
Operation 6
PART II - OTHER INFORMATION 12
I<PAGE>
PINNACLE FINANCIAL CORPORATION
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
II<PAGE>
<TABLE>
<CAPTION>
PINNACLE FINANCIAL CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998 AND DECEMBER 31, 1997
(Unaudited)
June 30, December 31,
1998 1997
------- ------------
<S> <C> <C>
Assets
- ------
Cash and due from banks $7,304,364 $10,789,675
Federal funds sold 6,560,000 4,657,170
Securities available for sale 90,826,637 82,696,136
Loans, net of allowance for credit losses
of $2,173,961 and $2,038,015, respectively 142,801,758 142,288,205
Premises and equipment 7,773,517 7,652,254
Accrued interest receivable 2,764,824 2,616,476
Foreclosed real estate 663,156 348,213
Other assets 1,394,873 1,292,020
------------ ------------
Total assets $260,089,129 $252,340,149
============ ============
Liabilities
- -----------
Demand deposits $41,667,730 $36,338,646
Savings and NOW deposits 63,953,957 63,051,651
Other time deposits 113,014,011 112,897,360
------------ ------------
Total deposits 218,635,698 212,287,657
Federal funds purchased 0 360,000
Accrued interest and other liabilities 2,609,204 2,646,197
------------ ------------
Total liabilities 221,244,902 215,293,854
------------ ------------
Shareholders' equity
- --------------------
Common stock, $10 par value; 5,000,000 shares
authorized, 768,000 shares issued and outstanding 7,680,000 7,680,000
Capital surplus 7,280,000 7,280,000
Retained earnings 23,171,724 21,391,928
Net unrealized appreciation on securities available for sale,
net of taxes of $375,560 and $358,168, respectively 712,503 694,367
------------ ------------
Total shareholders' equity 38,844,227 37,046,295
------------ ------------
Total liabilities and shareholders' equity $260,089,129 $252,340,149
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
1<PAGE>
<TABLE>
<CAPTION>
PINNACLE FINANCIAL CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND 1997
(Unaudited)
Three Months Three Months
Ended Ended
June 30, June 30,
1998 1997
<S> <C> <C>
Interest income
- ---------------
Loans $3,749,336 $3,586,967
Securities available for sale 1,360,249 1,359,187
Federal funds sold 113,466 56,843
---------- ----------
Total interest income 5,223,051 5,002,997
---------- ----------
Interest expense
- ----------------
Deposits 1,994,294 1,878,303
Fed Funds Purchased 0 1,318
---------- ----------
Total interest expense 1,994,294 1,879,621
---------- ----------
Net interest income 3,228,757 3,123,376
- ------------------- ---------- ----------
Provision for credit losses 75,000 88,000
---------- ----------
Net interest income after provision for credit losses 3,153,757 3,035,376
---------- ----------
Other income
- ------------
Service charges on deposit accounts 321,456 331,496
Other service charges and fees 242,103 96,153
Net realized gains on sales of securities available for sale 17,140 2,172
Other income 47,225 48,700
---------- ----------
Total other income 627,924 478,521
---------- ----------
Other expenses
- --------------
Salaries and employee benefits 1,123,705 1,081,084
Occupancy expense 270,315 240,135
Net realized losses on sales of securities available for sale 0 2,541
Other expenses 485,651 484,170
---------- ----------
Total other expenses 1,879,671 1,807,930
---------- ----------
Income before income taxes 1,902,010 1,705,967
Income tax expense 587,500 490,200
---------- ----------
Net income $1,314,510 $1,215,767
- ---------- ========== ==========
Net income per share of common stock $1.71 $1.58
===== =====
Average shares outstanding 768,000 768,000
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
PINNACLE FINANCIAL CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(Unaudited)
YTD YTD
June 30, June 30,
1998 1997
--------- ----------
<S> <C> <C>
Interest income
- ---------------
Loans $7,428,104 $7,086,033
Securities available for sale 2,657,300 2,719,229
Federal funds sold 198,276 104,381
---------- ----------
Total interest income 10,283,680 9,909,643
---------- ----------
Interest expense
- ----------------
Deposits 3,960,112 3,710,302
Fed Funds Purchased 267 1,788
---------- ----------
Total interest expense 3,960,379 3,712,090
---------- ----------
Net interest income 6,323,301 6,197,553
- -------------------
Provision for credit losses 150,000 171,000
---------- ----------
Net interest income after provision for credit losses 6,173,301 6,026,553
---------- ----------
Other income
- ------------
Service charges on deposit accounts 651,525 660,680
Other service charges and fees 442,402 176,222
Net realized gains on sales of securities available for sale 17,225 2,172
Other income 103,658 99,442
---------- ----------
Total other income 1,214,810 938,516
---------- ----------
Other expenses
- --------------
Salaries and employee benefits 2,239,193 2,130,645
Occupancy expense 518,282 476,389
Net realized losses on sales of securities available for sale 0 4,322
Other expenses 913,185 938,086
---------- ----------
Total other expenses 3,670,660 3,549,442
Income before income taxes 3,717,451 3,415,627
Income tax expense 1,169,655 991,200
---------- ----------
Net income $2,547,796 $2,424,427
- ---------- ========== ==========
Net income per share of common stock $3.32 $3.16
===== =====
Average shares outstanding 768,000 768,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
PINNACLE FINANCIAL CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(Unaudited)
June 30, June 30,
1998 1997
---------- ---------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income $2,547,796 $2,424,427
Adjustments to reconcile net income to net
Cash provided by operating activities:
Depreciation and amortization 245,728 208,571
Provision for credit losses 150,000 171,000
Deferred income taxes ---- ----
Net realized (gains) losses on securities available for sale (17,225) 4,854
(Increase) decrease in accrued interest and other assets (566,144) 358,431
Decrease in accrued expenses and other liabilities (36,993) (110,614)
----------- -----------
Total adjustments (224,634) 632,242
----------- -----------
Net cash provided by operating activities 2,323,162 3,056,669
----------- -----------
Cash flows from investing activities
Net (increase) decrease in federal funds sold (1,902,830) (59,689)
Purchase of securities available for sale (21,585,055) (14,496,150)
Proceeds from sales of securities available for sale 1,249,880 4,731,484
Proceeds from maturities of securities available for sale 12,240,035 10,578,861
Net increase in loans (663,553) (5,351,671)
Purchases of premises and equipment (366,991) (1,922,069)
----------- -----------
Net cash used by investing activities (11,028,514) (7,188,895)
----------- -----------
Cash flows from financing activities
Net increase in non-interest bearing demand deposits,
Savings and NOW deposit accounts 6,231,390 3,164,003
Net increase in time deposits 116,651 3,440,268
Net increase (decrease) in federal funds purchased (360,000) 660,000
Dividends paid (768,000) (691,200)
----------- -----------
Net cash provided by financing activities 5,220,041 6,463,071
----------- -----------
Net increase (decrease) in cash and due from banks (3,485,311) 2,440,845
Cash and cash equivalents at January 1 10,789,675 7,025,730
----------- -----------
Cash and cash equivalents at June 30 $7,304,364 $9,466,575
=========== ===========
Interest paid $3,658,983 $3,730,928
=========== ===========
Income taxes paid $1,100,965 $902,243
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4<PAGE>
PINNACLE FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(1) BASIS OF PRESENTATION
The consolidated financial statements include the accounts
of Pinnacle Financial Corporation (the Company) and its wholly-
owned commercial bank subsidiaries, Pinnacle Bank, N.A. and
Pinnacle Bank. All significant intercompany accounts have been
eliminated in consolidation.
In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments
(consisting only of normal recurring adjustments) necessary for
fair statements of the consolidated financial position and the
results of operations of the Company for the interim periods.
The results of operations for the six month period ended June 30,
1998 are not necessarily indicative of the results which may be
expected for the entire year.
(2) INVESTMENT SECURITIES
As of December 31, 1994, the Company adopted FAS No. 115,
Accounting for Certain Investments in Debt and Equity
Securities . All investment securities are classified as
available-for-sale and are recorded at their estimated fair
market values in accordance with the provision of FAS No. 115.
From time to time, the Company may decide to sell certain
securities prior to maturity for liquidity, tax planning and
other valid business purposes. Gains and losses are determined
using the specific identification method when securities are
sold.
(3) INCOME TAXES
Deferred income taxes are recorded as required by FAS No.
109, Accounting for Income Taxes , using the liability method
under which deferred tax assets and liabilities are determined
based on the differences between the financial accounting and tax
basis of assets and liabilities.
(4) ACCOUNTING FOR IMPAIRED LOANS
FAS 114, Accounting by Creditors for Impairment of a Loan
was adopted as of January 1, 1995 as required. Loans having
carrying values of $951,000 as of June 30, 1998 have been
recognized as impaired in conformity with FAS 114. The total
allowance for credit losses related to the impaired loans was
$439,000. For impairment recognized in conformity with FAS 114,
the entire change in the present value of expected cash flows is
reported as bad debt expense in the same manner in which the
initial impairment was recognized or as a reduction in the amount
of bad debt expense that otherwise would be reported. The
company has recognized specific allowances in prior periods for
each of these loans based on previous methodology for calculating
its allowance for credit losses.
5<PAGE>
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial
Condition and Results of Operations of Pinnacle analyses the
major elements of Pinnacle's consolidated balance sheets and
statements of income. This section reflects the results of its
wholly-owned subsidiary bank, Pinnacle Bank, National Association
( Elberton ). Pinnacle Bank, National Association, was the
surviving institution following the January 1, 1998 consummation
of the merger of Pinnacle Bank, National Association (formerly
First National Bank in Elberton) and Pinnacle Bank (formerly Tri-
County Bank of Royston).
Pinnacle continues to weigh the merits of additional
business combinations while maintaining a focus on its general
mission to responsibly serve the needs of its customers and
communities and to enhance profit potential and shareholder
value.
For a comprehensive presentation of Pinnacle's
financial condition and results of operations, the following
analysis should be viewed along with other information contained
in this report, including the financial statements and
accompanying disclosures. All amounts throughout this section
are rounded to the nearest 1,000 dollars, the nearest .1 million
dollars and to the nearest .1 percent to represent approximations
of reported amounts.
LIQUIDITY AND CAPITAL RESOURCES
The objective of liquidity management is to maintain
cash flows adequate to meet immediate and ongoing future needs of
credit demand, deposit withdrawal, maturing liabilities and
corporate operating expenses. Pinnacle seeks to meet liquidity
requirements primarily through the management of federal funds
and the investment securities portfolio. At June 30, 1998, 8.6%
of the investment securities portfolio had maturity dates within
the next year and an additional 75.8% matures within the next 5
years. During the first six months of 1998, federal funds sold
averaged $7.9 million thereby providing sufficient funds to meet
immediate needs. Other sources of liquidity are payments on
commercial and installment loans and repayment of maturing single
payment loans. Also, Pinnacle retains relationships with four
correspondent banks which could provide funds to it on short term
notice, if needed. Presently, Pinnacle has arrangements with
commercial banks for short term unsecured advances up to $5.3
million. Pinnacle's management intends to continue to closely
monitor and maintain appropriate levels of interest bearing
assets and liabilities in future periods so that maturities of
assets are such that adequate funds are provided to meet customer
withdrawals and loan requests while net interest margins are
maximized.
Regulatory policy generally requires the maintenance of
a liquidity ratio of 25%, which is generally defined as cash plus
liquid investments divided by deposits plus borrowings due within
one year. The desired level of liquidity is determined by
management based in part on Pinnacle's commitment to make loans
and an assessment of its ability to generate funds. At June 30,
1998, the liquidity ratio was 42.2%.
6<PAGE>
Average yields on interest bearing assets decreased to
8.4% for the current quarter compared to 8.8% for the same period
the year before. Total average interest bearing assets increased
by $13.1 million or 5.8% for the current period when compared
with the quarter ended June 30, 1997. Average net loans
increased $7.0 million or 5.1% in the three months ended June 30,
1998 from the same 1997 period, primarily as a result of a
healthy economy in Northeast Georgia. Average net loans during
the quarter for Pinnacle Bank, N.A. were $144.9 million.
Average yields on interest bearing assets decreased to
8.7% for the six month period ended June 30, 1998 compared to
8.8% for the same period the year before. Total interest bearing
assets increased by $11.8 million or 5.2% for the current period
when compared with the six month period ended June 30, 1997.
Average net loans increased $8.8 million or 6.5% in the six
months ended June 30, 1998 from the same 1997 period, primarily
as a result of originations in the two new branches and a healthy
economy in Northeast Georgia. Average net loans during the six
month period for Pinnacle Bank, N.A. were $144.3 million.
Other real estate owned increased by $315,000 during
the first six months of 1998, resulting in $663,000 held at June
30, 1998 compared to $348,000 at December 31, 1997. Non-
performing loans totaled $210,000 as of June 30, 1998
representing .1% of total loans at June 30, 1998 compared to
$235,000 at December 31, 1997, which represented .2% of total
loans at that date. Accrued interest as of June 30, 1998 on non-
performing loans totaled $20,000 which is not reported as income.
Non-performing loans at June 30, 1998 are classified as: real
estate, $169,000 and other collateralized loans, $41,000.
Pinnacle continues to maintain a concentration of core
deposits from an established customer base which provides a
stable funding source. Deposits increased $6.3 million to $218.6
million at June 30, 1998 from $212.3 million at December 31,
1997, due primarily to normal growth and continued economic
expansion in Northeast Georgia. Non-interest bearing deposits
increased $5.4 million to $41.7 million compared to December 31,
1997 balance of $36.3 million. Interest bearing deposits
increased $1.1 million at June 30, 1998.
Management continues to give priority to the importance
of maintaining high levels of assets with interest rate
sensitivity, cash and cash equivalents decreased during the first
six months of 1998 from December 31, 1997 levels by $1.6 million.
Investment securities increased $8.1 million from December 31,
1997 levels as management continues to give priority to the
importance of maintaining high levels of assets with interest
rate sensitivity.
Shareholders' equity increased $1.8 million to $38.8
million at June 30, 1998 from $37.0 million at December 31, 1997.
Earnings retained during the six months amounted to $1.8 million.
There was minimal change in the net unrealized gains due
stability in the bond market. FAS 115 which was adopted on
December 31, 1994 requires that unrealized gains/losses on
certain marketable securities be recorded in shareholder's
equity.
Pinnacle continues to maintain adequate capital ratios
(see Risk Based Capital Ratios below and see Results of
Operations below for discussion of dividend levels.) Pinnacle
7<PAGE>
maintained a level of capital, as measured by its average equity
to average assets ratio, of 14.8% during the first six months of
1998, compared to 13.8% for the year which ended December 31,
1997.
Management is not aware of any known trends, events or
uncertainties that are reasonably likely to have a material
effect on the registrant's liquidity, capital resources, or
results of operation. Pinnacle is not aware of any current
recommendations by the regulatory authorities which, if they were
implemented, would have such an effect. Loans classified for
regulatory purposes as loss, doubtful, substandard or special
mention do not represent trends or uncertainties which management
reasonably expects will materially impact future operational
trends.
RESULTS OF OPERATIONS (for the three month period ended June 30,
1998)
Pinnacle's operational results primarily depend on the
earnings of the banks. Earnings depend to a large degree on net
interest income, which is the difference between the interest
income received from investments (such as loans, investment
securities, federal funds sold, etc.) and the interest expense
which is paid on deposit liabilities.
Net interest income in the three months ended June 30,
1998 increased 8.1% as a result of growth, more favorable rate
spreads and management's ability to match rate sensitive assets
with rate sensitive liabilities in such a way that net interest
margins have increased from the same period the prior year. As a
result of increased deposits, interest expense increased $114,000
or 6.1% while interest income increased $220,000 or 4.4% in the
three months ended June 30, 1998 compared to the same period the
year before.
The provision for possible loan losses is the charge to
operating expenses that management believes is necessary to fund
the reserve for possible loan losses. The provision reflects
management's estimate of potential loan losses and the creation
of an allowance for loan losses adequate to absorb losses
inherent in the portfolio. Pinnacle provided $75,000 for loan
losses in the three months ended June 30, 1998 compared to
$88,000 it provided for the three months ended June 30, 1997.
Pinnacle experienced loan charge-offs in the three months ended
June 30, 1998 of $44,000 compared to $26,000 in the same period
in 1997. The allowance for loan losses increased $174,000 to
$2.2 million at June 30, 1998 compared to $2.0 million at June
30, 1997. Pinnacle's allowance for loan losses represents 1.6%
of total loans outstanding at June 30, 1998. Its net charge-offs
were $33,000 during the three months ended June 30, 1998 and
$16,000 during the same period in 1997.
Other income for Pinnacle during the three months ended
June 30, 1998 increased $149,000 to $628,000 from $479,000 for
the same period in 1997 due primarily to increased fees for
mortgage loans originated and sold in the secondary market. The
increase in fees were due to favorable rates and increased
efforts associated with these originations.
8<PAGE>
Other operating expenses for Pinnacle during the three
months ended June 30, 1998 increased $72,000 to $1.9 million from
$1.8 million for the same period in the previous year. The
increase in other operating expenses is attributable to increases
in salaries, employee benefits and occupancy expenses.
Pinnacle's income tax expense increased $97,000 for the
quarter compared to the same period in the previous year due
primarily to increased taxable income. The effective income tax
rate during the quarter of 30.9% is a increase of 2.2% over the
same quarter in 1997. Please refer to the Results of Operations
for the Six Month period for an explanation of the increase of
income taxes over last period.
Results of operations can be measured by various ratio
analyses. Two widely recognized performance indicators are
return on average equity and return on average assets. Net
income during the three months ended June 30, 1998 was $1.3
million and represents annualized returns of 13.8% on average
shareholders' equity and 2.0% on average assets. Comparable
amounts during the same period of 1997 were $1.2 million, 14.3%
and 2.1%, respectively. As detailed in previous paragraphs, the
increase in net income of $99,000 was primarily due to the net
effect of the increase in the net interest margin and increased
expenses associated with the new branches and the name changes.
Dividends declared during the three months ended June
30, 1998 increased $.05 per share to $.50 from $.45 per share
during the same period of 1997.
RESULTS OF OPERATIONS (for the six month period ended June 30,
1998)
Pinnacle's operational results primarily depend on the
earnings of the banks. Their earnings depend to a large degree
on net interest income, which is the difference between the
interest income received from investments (such as loans,
investment securities, federal funds sold, etc.) and the interest
expense which is paid on deposit liabilities.
Net interest income in the six months ended June 30,
1998 increased 2.0% as a result of more favorable rate spreads
and management's ability to match rate sensitive assets with rate
sensitive liabilities in such a way that net interest margins
have increased from the same period the prior year. As a result
of increased deposits, interest expense increased $250,000 or
6.7% while interest income increased $374,000 or 3.8% in the six
months ended June 30, 1998 compared to the same period the year
before.
The provision for possible loan losses is the charge to
operating expenses that management believes is necessary to fund
the reserve for possible loan losses. The provision reflects
management's estimate of potential loan losses and the creation
of an allowance for loan losses adequate to absorb losses
inherent in the portfolio. Pinnacle provided $150,000 for loan
losses in the six months ended June 30, 1998 and $171,000 for the
same period in 1997. Pinnacle experienced loan charge-offs in
the six months ended June 30, 1998 of $77,000 compared to $75,000
in the same period in 1997. Its net charge-offs were $14,000
during the six months ended June 30, 1998 and $56,000 during the
same period in 1997.
9<PAGE>
Other income for Pinnacle during the six months ended
June 30, 1998 increased $276,000 to $1,215,000 from $939,000 for
the same period in 1997 due primarily to increased fees for
mortgage loans originated and sold in the secondary market. The
increase in fees were due to favorable rates and increased
efforts associated with these originations
Other operating expenses for Pinnacle during the six
months ended June 30, 1998 increased $121,000 to $3.7 million
from $3.5 million for the same period in the previous year. The
increase in other operating expenses is attributable generally to
increases in salaries and employee benefits.
Pinnacle's income tax expense increased $178,000 for
the six months ended June 30, 1998 compared to the same period in
the previous year due primarily to increased taxable income. The
effective income tax rate during the period of 31.4% is a
increase of 2.4% over the same quarter in 1997. The Company is
now subject to state income taxes due to having utilized all
carryover credits and net operating losses from prior years. Over
the years, the management has reduced the ratio of U.S. Treasury
investments, which are tax-exempt for state income tax purposes,
because the tax yield is greater on taxable investments.
Results of operations can be measured by various ratio
analyses. Two widely recognized performance indicators are
return on average equity and return on average assets. Net
income during the six months ended June 30, 1998 was $2.5 million
and represents annualized returns of 13.2% on average
shareholders' equity and 2.0% on average assets. Comparable
amounts during the same period of 1997 were $2.4 million, 14.3%
and 2.2%, respectively. As detailed in previous paragraphs, the
increase in net income of $123,000 was primarily due to the
increase in the other income net of tax expense.
Dividends declared during the six months ended June 30,
1998 increased $.10 per share to $1.00 from $.90 per share during
the same period of 1997.
Year 2000
- ---------
The "year 2000 issue" arises from the widespread use of
computer programs that rely on two-digit codes to perform
computations or decision-making functions. Many of these programs
may fail due to an inability to properly interpret date codes
beginning January 1, 2000. For example, such programs may
misinterpret "00" as the year 1900 rather than 2000. In addition,
some equipment, being controlled by microprocessor chips, may not
deal appropriately with the year "00". Pinnacle has developed a
plan that will assure the institution of being ready to process
in the year 2000. The plan involves costs such as purchasing both
hardware and software and will entail the use of both internal
and external personnel. Modifications and upgrades will be
performed on the majority of Pinnacle's existing systems. The
cost of assuring readiness to process in the year 2000 has been
budgeted, but unexpected costs may arise as Pinnacle implements
its plan of action.
There is no assurance that Pinnacle's customers and
vendors will be ready in the year 2000. Pinnacle will host
educational seminars for our customers alerting them and
providing expertise on how to limit their exposure. Pinnacle is
also developing contingency plans for all critical applications
and service providers so business operations may proceed in the
year 2000.
10<PAGE>
The following tables present Pinnacle's Regulatory capital
position at June 30, 1998:
<TABLE>
<CAPTION>
(Rounded to the nearest thousand)
<S> <C> <C>
Total Risk Adjusted Assets $155,842
Risk Based Capital Ratios:
TIER 1 CAPITAL
Common stock $7,680 4.97%
Surplus 7,280 4.71%
Retained earnings 23,172 14.87%
Less: Goodwill 0 0.00%
----------- --------
Total Tier 1 capital 38,132 24.47%
Tier 1 minimum requirement 6,234 4.00%
----------- --------
Excess (shortfall) $31,898 20.47%
=========== ========
TIER 2 CAPITAL
Tier 1 from above $38,132 24.47%
Subordinated debentures 0 0.00%
Allowance for loan losses, limited to 1.25%
of risk weighted assets 1,948 1.25%
----------- --------
Total Tier 2 capital 40,080 25.72%
Tier 2 minimum requirement 12,467 8.00%
----------- --------
Excess (shortfall) $27,613 17.72%
=========== ========
LEVERAGE RATIO
Tier 1 capital $38,132 14.72%
Minimum requirement 7,769 3.00%
----------- --------
Excess (shortfall) $30,363 11.72%
=========== =======
Average total assets, net of goodwill $258,971
==========
</TABLE>
11<PAGE>
PINNACLE FINANCIAL CORPORATION
PART II
ITEM 2. LEGAL PROCEEDINGS
Pinnacle is not aware of any material pending legal
proceedings to which Pinnacle or any of its subsidiaries is a
party or to which any of their property is subject.
ITEM 3. CHANGES IN SECURITIES
None.
ITEM 4. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 5. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On March 10, 1998 the Registrant held its annual
meeting of Shareholders where the following directors were
elected at the meeting for one year terms:
L. Jackson McConnell James E. Purcell
Lint W. Eberhardt Maurice Bond
L. Jackson McConnell, Jr. Steve Williams
Robert H. Hardy H. Thomas Brown
Charles Bradshaw William F. Grant
Calvin Hill Robert E. Lee, III
J. Daniel McAvoy Anderson Dilworth
Don C. Fortson D. Wayne Braswell
Etherage C. Phillips
619,994 Shares (81%) were cast in favor of the
directors. There were an additional 1,248 shares (less than one
percent) cast for only ten of the elected directors. There were
no broker non-votes cast.
ITEM 6. OTHER INFORMATION
None.
ITEM 27. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27 - Financial Data Schedule (for SEC use only)
There were no reports on Form 8-K.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant has caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
PINNACLE FINANCIAL CORPORATION
Date: August 12, 1998 By: /s/ L. Jackson McConnell
L. Jackson McConnell
Chairman and Chief Executive Officer
(Principal Executive and Financial Officer)
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