Good morning everyone, and welcome to the Pinnacle Financial Partners' First Quarter 2016 Earnings Conference Call. Hosting the call today from Pinnacle Financial Partners is Mr. Terry Turner, Chief Executive Officer and Mr. Harold Carpenter, Chief Financial Officer. Please note, Pinnacle's earning release and this morning's presentation are available on the Investor Relations page of their Web site at www.pnfp.com. Today's call is being recorded and will be available for replay on Pinnacle's Web site for the next 90 days. At this time, all participants have been placed in a listen-only mode. The floor will be open for your questions following the presentation. [Operator Instructions]. Before we begin, Pinnacle does not provide earnings guidance or forecasts. During this presentation, we may make comments which may constitute forward-looking statements. All forward-looking statements are subject to risks, uncertainties, and other facts that may cause the actual results, performance or achievements of Pinnacle Financial to differ materially from any results expressed or implied by such forward-looking statements. Many of such factors are beyond Pinnacle Financial's ability to control or predict, and listeners are cautioned not to put undue reliance on such forward-looking statements. A more detailed description of these and other risks is contained in Pinnacle Financial's most recent Annual Report on Form 10-K. Pinnacle Financial disclaims any obligation to update or revise any forward-looking statements contained in this presentation, whether as a result of new information, future events, or otherwise. In addition, these remarks may include certain non-GAAP financial measures as defined by SEC Regulation G. A presentation of the most directly comparable GAAP financial measures and a reconciliation of the non-GAAP measures to the comparable GAAP measures will be available on Pinnacle Financial's Web site at www.pnfp.com. With that, I am now going to turn the presentation over to Mr. Terry Turner, Pinnacle's President and CEO.

Thank you Bridgette, good morning. As I have done every quarter for the last couple of years, I will begin with this snapshot of the quarter which hopefully gives a broader context of our firm's philosophy, strategy, and execution overtime. As I try to remind each time, our basic thesis for consistently driving our share price higher is that the three most important valuation drivers are: number one, revenue growth which for this firm is largely influenced by balance sheet growth; number two, EPS growth which for this firm is largely influenced by the revenue growth; and then number three, asset quality. And so we focus intentionally on those variables. Also through good times and bad, companies that consistently grow book value per share tend to grow share prices. The top row graph shows real top line and bottom line growth with a 43% revenue growth rate year-over-year and a 14.5% annualized growth rate EPS which at $0.71 was a record high and it is the 23rd consecutive quarter of double-digit year-over-year EPS growth, excluding extraordinary items. From a profitability perspective, excluding merger charges, our return on average assets which is not on the chart was 1.32% right in the center of our target range and our ROTCE which is show there was 15.64% top quartile performance among an extremely high performing peer group. So, revenue growth, earnings growth, and profitability continued to be very strong. As you can see on the second row graph, we're getting outsized balance sheet growth with end of period loans, up 17.4% annualized linked quarter between the first quarter of 2016 and the fourth quarter of 2015. That's a rate of organic growth slightly in excess of what we’ve sustained over the last three to four years, and we are successfully funding virtually all…

Thanks, Terry. For those of you that have followed us over the years, you know that we pay attention to expenses but we spend most of our time and energy developing tactics to grow revenues organically. It’s our belief that top-line revenue growers that can leverage that type of growth with increased earnings will be rewarded with outsized multiples by the markets. So far so good. This chart gets at that in some detail. The green bars are fees while the blue bars represent spread income. The dark line on the chart is the critical one as it denotes revenue per share. Growing EPS or tangible book value per share is obviously much more difficult if this line will stagger down. Our trailing four quarter revenue per share is around $9 which is up 23.5% from the previous trailing four quarter period. Excluding margin charges, our trailing four quarter fully diluted EPS is up approximately -- is approximately $2.76 up 27.2% from the previous trailing four quarters. So we believe our firm has performed admirably and transferred a reasonable amount of our revenue growth to bottom line results. That said this organization is undergoing a lot of change in the last 12 months and there is more change coming but as it impacts this line we believe it is all positive change. I believe that the Avenue merger will also be positive to revenue per share growth and after seeing our first quarter loan growth we believe it is not only a leading indicator to this future positive but is near term validation as to why the combination of Pinnacle and Avenue made so much sense. Concerning loans specifically as the chart indicates, average loans for the quarter were 6.74 billion. First quarter ELP March 31 loan balances are higher…

Okay. Thanks, Harold. And so I want to go back to 30,000 feet here for just a minute, kind of talk about the strategic outlook for Pinnacle. I get asked all the time, what about going out of state, and so I want to be clear, we believe we're going to build a $13 billion to $15 billion bank in Tennessee’s four urban markets. In each market we expect to be one of the top three banks in terms of FDIC deposits, and so you might say the firm’s strategy is to be a foot wide and two yards deep. As has been the case since our founding we rely on distinctive service and effective advice to take share from vulnerable large regional and national franchises that have previously dominated our markets, which as you can see on the slide are essentially the same competitors in each of the four markets. So moving from the asset target to return on asset target we are currently targeting 1.2 to 1.4 ROA. More than three years ago we laid out our sustainable business model which at that time called for a targeted range of 1.10 to 1.30 for ROA. We also have brought down targets for the four critical components required to produce that ROA, the margin and non-interest income to assets, the non-interest expense to asset, and net charge offs. And then in mid 2014 in conjunction with the 2014 to 2016 strategic plan we increased that ROA target by 10 basis points to a range of 1.20 to 1.40 which is where we now are. In conjunction with the 2015 to 2017 strategic planning process we decided to leave the ROA target as it is but as it related to the four individual components we decided to increase the non-interest…

Thank you, Mr. Turner. The floor is now open for your questions following the presentation. [Operator Instructions]. Our first question is from Kevin Fitzsimmons from the Hovde Group. Your line is open.

Hey, good morning, Terry and Harold. How are you?

Good. How are you?

Good. Can we -– you’ve mentioned a few times and emphasized it Terry on the call that about the pace of recruiting has been as strong as you can remember and how high you expect it to continue to be. I'm just curious can you -– how much of why it’s so strong right now is deliberate, in other words, I'm guessing maybe it’s because you are new to Chattanooga and to Memphis, and so that’s maybe accelerated your pace for that or is it something about what the competitors are doing and its leaving an opportunity open for you. If you can just give a sense for what's driving that recruiting to be so strong right at this moment?

Yes. Kevin, that’s a great question and you have hit at two things both of which I think are impactful. There's no doubt that we sort of have more hunting ground by virtue of being in two additional markets, and so that increases our volume of hiring. But honestly, I would say that it's probably more about the competitive landscape than it is the new territory. And all I mean by that Kevin, you’ve followed our company a long time, I think you understand this. I meet every Monday morning with my Director of Board, so we review the company's performance in detail every Monday morning. We spend as much time on our recruiting pipelines as we do on our business development pipelines. And so I think that’s unusual versus most of our peers. I'm just trying to communicate that for a very long time, we've focused on a weekly basis on hiring pipeline, who the targeted hires are, where we are with them, what the next steps are, and so forth. And I would say that we're having more success -- I think we've been successful at it all along, but I’d say we're having more success right now than we have versus some of the large regional banks. I do think their frustration levels are very high in several of those companies, and so I think that has sort of turbo charged the recruiting success as well.

Terry, what is it specifically though, I mean I know you guys have always focused on organic growth, but some of those larger regional banks that traditionally have been easier targets for the recruiting, it seems like just from our advantage point that they’re getting more on the offensive and they’re focused a little more organically and they’re healthier, they have healthier balance sheets. So one would think that maybe the recruiting effort is a little tougher on that sense, but if -– but maybe I'm wrong, if you can just shed a little light on that?

Yes, I think part of your assertion is true which is that the large regional banks have a better financial performance, a better asset quality level and so forth today than they had going back two, three, four years ago. So there's no doubt there's improvement on that regard. But again, I would just state that I don’t think the thesis changes at all because they’re financially healthier. And again, I don’t say this Kevin to disparage the large regional banks. I've been in one. It’s hard to do in a large regional bank. But there is just a lot of disengagement, the way they pay incentives, the timeliness of paying them, just how they communicate with their people, how they excite and engage them. I guess I'm really speaking of just the softer aspects of what's it like to work in a large regional bank. I suppose it might be a tick better from the perspective that the financial performance is better but those are the things which is so important, just what’s it like to work in that company, I would say they are no better today than they have been since we started the company.

Got it, okay, thank you. One quick follow-up on credit, I know you mentioned that the review of the auto book has driven the increase in net charge-offs, and on NPAs, specifically non-accruals, even though it is at a fairly low base, it was a pretty healthy linked quarter increase, just curious if you can give us a little color on what was driving that and was it a few big lumpy things or was it several things that were spread out?

I would say, generally Kevin there is a concentration in a couple of bigger ticket items, and again I think you know and you have seen this happen in the past, I mean literally you can have $20 million to $30 million fall into or outside a quarter by a week or two. And so, I think in this case we had some upgrades we thought might be made that probably spilled over in the second quarter and some downgrades. We are hopeful it wouldn’t occur but actually it spilled into the first quarter. So, again it’s few transactions got lumpy in there, but again it doesn’t feel alarming to me at all.

And nothing, nothing at all tied to energy or direct or indirect on that front?

No, nothing energy related at all.

Okay, alright. Thanks guys.

Yes.

Our next question is from Tyler Stafford with Stephens Incorporated, your line is open.

Hey, good morning guys.

Hey Tyler.

Hey, I wanted to start on BHG and I know you increased the 2016 accretion guidance this quarter, but can you talk about what happened with BHG this quarter. My understanding was that there wasn’t a large seasonal dynamic at play with BHG. So was there something else -- was there some other aspect to that I guess? And then as a follow-up can you tell us what the originations and gain on sales were out of BHG this quarter?

Yeah Tyler, this is Harold. I don’t think there was anything significant or meaningful that would distort the timeliness or the recognition of the BHG income. I don’t have all of their production statistics with me yet, so I don’t know the answer to that second part of that question either. But we weren’t anticipating the seasonality either but it does occur. And so, we were down there last week, talking to the BHG people. I will just tell you they are optimistic as they have ever been about their business model and what kind of business flow that they have got going through their pipelines right now.

Do you happen to have the pipelines that you referenced in the press release, what they are at today and I guess give a sense for what they were heading into 1Q or last quarter?

I will just -- I will say they are up.

Okay, and maybe just a couple of questions on the ROA portfolio as a follow-up, can you give us the total size of that book at this point, what was the mix between prime, subprime, new and used, and I guess current delinquencies right now as well, any kind of characteristics of the auto book as we stand at quarter end?

Yeah, we got about 50 million left of this used car paper remaining on our ledgers right now and I think there is about another 50 million in more traditional and direct type that is coming from the new car dealers. As far as delinquencies are concerned, I think we have got something like everything over 120 days has been charged up. We have probably got about 1 million over 90 right now. So they are actively working that $1 million. And in all that million I believe is in that subprime group. I say subprime, it is more of a used car paper.

Okay, alright I love that. Thanks guys.

Thanks Tyler.

Our next question is from Michael Rose with Raymond James, your line is open.

Hey guys, good morning. How are you?

Hey, how are you Mike.

Good, I wanted to look at that 5.30 in spite that and if I look at sub standard commercial loans, can you just help us reconcile what the large increase is quarter-to-quarter?

Yes, there was a -– let me get my glasses on. Yes, I know there's a couple of pretty significant ones in that increase. I think there's one that was about $14 million and another one that’s about $5 million that make up most of that increase. There may be another couple of big ones in there as well but that’s where most of that increase is.

Now are any of those from the banks you acquired or they kind of legacy Pinnacle?

The two I spoke of are legacy Pinnacle.

Okay, and any -– I just want to look at the -- obviously the statistics around Nashville and Austin is still very strong. So can you give us kind of a little color as to what happened there, if there's any sort of trend that you’re seeing that would cause that increase?

No, I don’t think there's any trends at all. I think they’re just -– as Terry mentioned, it’s just lumpiness coming around. So…

Okay. And then if I can just touch on the margin this quarter, I think in the press release you mentioned there were some purchase accounting accretion. What was the margin as to the purchase accounting accretion this quarter?

It would have been probably about 15 basis points less maybe 10. It impacted loan yields by 15 basis points.

Okay. And then I haven’t opened up the S-4 but what are the kind of pro forma impacts on a margin basis for the Avenue deal?

The Avenue deal will be diluted to the margin by a couple of ticks.

Okay and then maybe one more from me for Terry. You talked about the 14 people that you brought on this quarter and historically you talked about kind of the pipeline. Have you sized the business that those 14 folks that you’ve brought on could bring in over time?

Yes, Michael I'm not sure I can tell you the number. I mean each one’s evaluated independently, and again, I think you know enough about our hiring model. Each person we hire we have an agreement with them about what we think they’ll bring in year one, two and three. And so we expect these hires to produce similar leverage. We manage our relationship managers based on a salary multiple that they can produce when they are mature and so we believe that all these people will hit the salary multiples that we produce out of our existing employee base.

Okay. So it sounds like maybe you’ve done the math, you’re just not willing to tell us.

Yes, I think that’s right.

Fair enough. Thanks for taking my questions guys.

Alright.

Our next question is from Jefferson Harralson with KBW. Your line is open.

Hey, guys. Thanks, good morning.

How are you?

Good. The -– on the auto book, is there some catch up on this where now let’s say a change, we're going to charge off everything over 120 days or is it, a lot of this deterioration happened this quarter?

Yes, I think a lot of deterioration did happen this quarter. There has been a focused effort on cleaning that book up now for, call it, 9 to 12 months. And so I think they’re -– we're actively reviewing that book and hopefully we've gotten at the majority of the issues.

Right, you mentioned the accretable yield was $2.6 million this quarter I think, is that right?

That’s right.

Does that include all the principle and interest from those acquired loans or just the amount of what will be in excess of what you would normally bring in on those loans?

It’s the excess on those loans.

Alright, and how much was that last quarter, was that zero last quarter?

No, it was about 1.6, I think is the number.

Okay. And I’ll finish up on BHG as -– can you comment on the [indiscernible] trends there and the pricing that’s happening at BHG?

I think their pricing is pretty stable quarter-to-quarter. It’s just a volume issue fourth quarter to first quarter and so like I mentioned earlier, we were down there last week. They are pretty excited about what 2016 is shaping up to be.

Okay. And just a last – this might be for Terry, while on the -– you mentioned your advantaged stock that you are now in most of the markets you want to be in, in Tennessee. So is it time to expand outside Tennessee or is that -– are you thinking front [ph]?

Yes, I think Jefferson, you and I have had this discussion a lot of times. I think what I would say is that I never say never. I mean I can imagine there might be some day some time when we might want to go outside of the state. But I would say this is not that time. If you look at the opportunities we have in front of us you’ve got a tremendous growth trajectory. You can grow organically at $1 billion a year in these bull markets that we know well, that we have mass in, that we perform well, and in which we have operating leverage, in which we're able to hire people at dramatic pace. And so it just doesn’t feel like the time I want to figure out how to go to Virginia or Georgia or North Carolina or whatever it is. So I don’t want to say that we’d just never do it. I can imagine there might be a day and a time but I wouldn’t want you to exit this call thinking, hey, those guys are trying to work something out to enter other markets besides Tennessee because we're not working on that right now.

Got you, alright, thanks guys.

Okay, thanks, Jeff.

[Operator Instructions]. Our next question is from Andy Stapp with Hilliard Lyons. Your line is open.

Good morning.

Hey, Andy.

If I adjust BHG’s 1Q 2015 results by adjusting for full quarter and your increased ownership, its looks like their earnings are down year-over-year, is that the case or I need to take another look at my math?

Well, if I were you I would take another look at the math. They ought to be fairly close to flat. The -– we acquired BHG in the first part of February last year, and then we acquired the 19% in the last -– in the first part of March this year.

Right.

So it ought to be fairly close to flat.

Okay. And could you provide some color on linked quarter increase in gains on sale of loans as well as the growth prospects for this line item?

Yes. That’s all mortgage -– residential mortgage. They had a great quarter again with production. And I think it was fairly balanced between new purchases as well as refi business.

Okay. What type of growth should we think of going forward in that line item?

Well, I think as long as rates are where they are particularly on the 10-year, then they’ll have a steady flow of business. I know that our mortgage guys are hiring people in Memphis and Knoxville and Chattanooga right now. So we've got some volume increase that we will expect out of these new hires.

Okay.

Andy, I think generally you would guess that’s a pretty cyclical thing.

Right.

Principle selling activities pick up in the second, third quarter and tail off in the fourth quarter and first quarters. So again we’d be optimistic on the outlook of that business going forward.

Okay. And were there any unusual items in other non-interest income and other non-interest expense, are these line items good run rates?

I would say they are probably pretty good run rates. There's a variety of things going on in there but I don’t think there's anything that’s significant or constant.

Okay. And you’ve been guiding for the past several quarters for low double-digit loan growth with the success you’ve had in interacting revenue producers might just be conservative, you think?

Well, I don’t know. I think we ought to just stick with the guidance that we have. We produced low double-digit loan growth for the foreseeable future.

Okay. Great, thank you.

Thank you, Andy.

Our next question is from Stephen Scouten with Sandler O'Neill. Your line is open.

Hi, guys. How are you doing?

Good.

I had a couple of maybe kind of tie-up questions on some of the things already been asked, maybe following up on that loan growth question from Andy, the $1 billion for the year, is that still a number you think you can hit? And as you use your basis for that number, would it be the $115 million of organic growth or would it kind of be the net -– the $248 million including the purchases?

Well, let me talk about the $115 million in net growth during the quarter. If you go back and look at last quarter, last first quarter, I think we did $55 million in net loan growth, so we did 2x that run rate. If you go back and look at the first quarter of 2014, I think we did $37 million. So while I know that you, you're looking at it saying, okay, linked quarter average-to-average it looks like 7% while I’m looking at it saying it’s a while over first quarter that’s 2x to 3x what I've done the last first quarters. And so that again would cause me to be extremely optimistic. I think the $1 billion in growth, I'm not necessarily tying that to the – okay, I did $115 million in the first quarter therefore here's the math. What I would say is that’s what our planned growth rate is and we're running ahead of plan.

Okay. Yes, that’s great. I appreciate that. And then noticing on the balance sheet here, it looked like there was a pretty big jump in your securities balances in the quarter and also a really nice increase in the yield on taxable securities. So anything unique there or any kind of change in strategy or expending duration or kind of what's going on there?

Yes, I don’t think there's any kind of change in strategy on the municipal book. The jump in the bond book was primarily attributable to public bonds and those balances coming in towards the end of the year so we had to get them collateralized with securities.

Makes sense. Okay, and then maybe jumping back to BHG for a second, I know there's been kind of a lot of questions around trying to figure out what the potential of that group can be. But I mean with no major seasonality and the increased investment, I mean, can you kind of frame up a run rate at all of what you think that might be? I mean is this a $9 million to $10 million kind of a quarter revenue opportunity or -- I mean obviously its – it was kind of lumpy in 2015 and there are some partial quarters in there? So anything you can do that would kind of give us an idea of what you think this can be on a dollar basis?

Well, I think if you go back and look at the fourth quarter call and I think we reported something like $70 million in pre-tax or something like that for them. They think they are well into that range this year and think they’ll be able to beat that number.

Okay. That’s helpful. Thank you. And then maybe be one last one from me, is just kind of thinking about your exposure to construction lending in these new HBCRE guidelines and that you guys screen relatively high on that scale especially with some of the impact of the acquisitions. So any regulatory impacts there with these HBCRE guidelines and anything that you're going to do differently as it pertains to growing that portion of the loan portfolio?

Yes, Stephen, that’s a great question. We've obviously had a lot of discussions with our regulators over the last six, nine months. But I don’t think there's any strategic change in what we're going to do with respect to that. Harvey White has done an admirable job in making sure that we're hitting on all the points with those new regulations. So I think it is steady as she goes and we're still going focus on that commercial real estate book.

Okay. Thanks for taking my question guys and congrats on the great quarter and on the new hires.

Alright, thank you.

Our next question is from Brian Martin with FIG Partners. Your line is open.

Hey, guys.

Hey, Brian.

Hey, just a couple last things here as well. Just going back to BHG, Harold, anything just with the first quarter seasonality just as far as the remainder of the year, I guess is it more flattish by quarter if we think about it or is it we still see some seasonality or increases in second and third or just any thought on that as far as going back to seasonality?

Yes, I think what will happen is, like I said, they posted like $70 million in pre-tax last year. They are pretty confident they’ll be able to beat that number pretty good this year and they’ve ramped up on the sales side so they’ve got more people in shares. They feel like the brand’s getting a lot better recognition around. So I think if I were in your shoes I’d be counting on an increase in that $70 million this year and just plan forward accordingly.

Okay. And then just on the expenses, I know you talked about all the new hires, not sure how many of them were in there for what part of the quarter, but you are obviously getting the synergies at the 25% headcount. So I mean still the thought would be that expenses are higher second quarter versus first quarter on the salary lines, just a maybe not as much of an increase with the new hires given the headcount reduction?

Yes, there ought to be an offset with the integration of the capital mark of synergy case coming online at the end of April for sure. Also the payroll tax reset was probably about $800,000 number here in the first quarter. So that ought to go away here fairly quickly. So, we are not counting on any big upticks and expenses other than when these new hires come on board as we take them in the second, third, and fourth quarters.

I got you. Okay, alright and then just last two, just as it relates to NIM [ph] and Avenue, I mean the kind of a guidance range, I mean can you remind us what the guidance range is on them and just it sounds like is it 3.70 to 3.90 or do I have that wrong as far as kind of what your target range is?

Yeah, we think this year we ought to be in the 3.70 to 3.90 when Avenue comes on board, you are probably looking at anywhere from 2 to 5 basis points in dilution.

Okay, alright and then just lastly, just on the credit leverage, just given the somewhat of drive down the reserve this quarter, just any though as far as additional credit leverage going forward or just how you are thinking about that?

Yeah, we still believe there is credit leverage in our reserve accounts. This quarter was obviously one where we had to think about that curve, the automobile loan portfolio. But we still believe there is additional credit leverage that we can harvest or invest this year.

Okay, alright that is all from me guys, thanks and nice quarter.

Thanks Brian.

Thank you. We do have a follow-up from Jefferson Harralson with KBW. Your line is open.

Hey, thanks. I meant to ask you at the first time on the loan purchase, it sounds unusual but you are hiring and you are also purchasing presumably from the institution where they were, so as if that the earns just came over and then you went to the bank and offered to buy them, how -- seems unusual, how did this come about?

Yeah, thanks. I think you know we hired a great firm, Cadence and Cadence had a commercially oriented group there. We hired that group and I think Cadence probably has a desire to leave this market, I am not their spokesperson but again you could check with them on their rationale. But I think they would want to exit the market and so we were able to have to let them out the lenders, just go ahead and buy the book as opposed to wait in there and try to take it over time.

Got you, alright, thanks guys.

Alright.

Thank you and I am not showing any further questions. This does conclude the Q&A portion of the call as well as the conference call. Ladies and gentlemen thank you for joining, you may now disconnect and everyone have a great day.