Pinnacle Financial Reports Record Loan Growth, Strong Asset Quality and Earnings of $0.34 per Fully Diluted Share for Second Quarter of 2008

NASHVILLE, Tenn.--(BUSINESS WIRE)--Pinnacle Financial Partners Inc. (Nasdaq/NGS: PNFP) today reported strong earnings and record loan growth for the quarter ended June 30, 2008. Fully diluted earnings per share were $0.34 for the quarter ended June 30, 2008, compared to $0.33 per fully diluted share for the quarter ended June 30, 2007. Excluding merger related expense associated with its Nov. 30, 2007 acquisition of Mid-America Bancshares Inc., fully diluted earnings per share were $0.37 for the quarter ended June 30, 2008, compared to $0.33 for the same period last year, an increase of 12.1 percent.

Fully diluted earnings per share were $0.60 for the six months ended June 30, 2008, compared to $0.66 per fully diluted share for the six months ended June 30, 2007. Excluding merger related expense associated with the Mid-America acquisition, fully diluted earnings per share were $0.71 for the six months ended June 30, 2008, compared to $0.66 for the same period last year, an increase of 7.6 percent.

Pinnacle also reported a record $166 million in organic loan growth in the second quarter of 2008, a 52 percent increase over the $109 million reported in the same quarter of 2007. The growth in loans contributed to a higher provision for loan loss expense for the second quarter of 2008 when compared to the same quarter last year.

SECOND QUARTER 2008 HIGHLIGHTS:

• Strong Earnings
  • Net income for the second quarter of 2008 was $7.96 million, up 46.7 percent from the prior year's second quarter net income of $5.43 million. Excluding after-tax merger related expense of $820,000, net income was $8.78 million, up 61.8 percent over the same period last year.
  • Revenue (the sum of net interest income and noninterest income) for the quarter ended June 30, 2008, amounted to $36.74 million, compared to $23.21 million for the same quarter of last year, an increase of 58.3 percent.
• Continued balance sheet growth
  • Loans at June 30, 2008, were $3.03 billion, up $1.37 billion from $1.66 billion at June 30, 2007. This 12-month increase in loans includes organic growth of $505 million, or an annualized growth rate of 30.4 percent, and $864 million in loans acquired in conjunction with the Mid-America merger.
  • Total deposits at June 30, 2008, were $3.15 billion, up $1.35 billion from $1.80 billion at June 30, 2007. This 12-month increase includes organic growth of $398 million, or an annualized growth rate of 22.1 percent, and $957 million in deposits acquired in conjunction with the Mid-America merger.
• Superior credit quality
  • Annualized net charge-offs as a percentage of average loan balances were 0.12 percent and 0.07 percent for the three and six months ended June 30, 2008, respectively, compared to 0.08 percent and 0.06 percent for the three and six months ended June 30, 2007, respectively.
  • Nonperforming assets were 0.73 percent of total loans and other real estate at June 30, 2008, compared to 0.72 percent at March 31, 2008, 0.78 percent at Dec. 31, 2007 and 0.19 percent at June 30, 2007. Approximately $9.60 million of the $22.25 million of nonperforming assets at June 30, 2008 were attributable to the Mid-America acquisition.
  • Past due loans over 30 days, excluding nonperforming loans, were 0.34 percent of total loans and other real estate at June 30, 2008, 0.77 percent at March 31, 2008, compared to 0.45 percent at Dec. 31, 2007 and 0.31 percent at June 30, 2007.

“Pinnacle’s solid performance in the second quarter, in the face of a difficult operating environment in which many banks are struggling, is a tribute to the skill and long-term experience of our associates. Our approach of hiring only highly experienced bankers pays off in more difficult economic environments because it enables us to continue moving market share from struggling large regional banks and to grow assets at a rapid rate while maintaining excellent asset quality. During the second quarter, we produced annualized linked-quarter loan growth of 23 percent, year-over-year earnings per share growth of 12.1 percent adjusted for merger related expenses, and maintained an extraordinarily sound loan portfolio with just 0.07 percent in year-to-date annualized net charge-offs,” said M. Terry Turner, Pinnacle's president and CEO. “We also maintained low and stable non-performing and past due loan trends.”

FINANCIAL PERFORMANCE AND BALANCE SHEET GROWTH

• Return on average assets for second quarter 2008 was 0.82 percent compared to 0.98 percent for the second quarter of 2007. Excluding the impact of the Mid-America merger related expense, return on average assets for the second quarter of 2008 would have approximated 0.90 percent.
• Return on average stockholders' equity for the quarter ended June 30, 2008, was 6.71 percent compared to 8.24 percent for the second quarter of 2007. Excluding the impact of the Mid-America merger related expense, return on average stockholders' equity for the second quarter of 2008 would have approximated 7.40 percent.
• Return on average tangible stockholders' equity (average stockholders' equity less goodwill and core deposit intangibles) for the quarter ended June 30, 2008, was 14.67 percent compared to 15.65 percent for the second quarter of 2007. Excluding the impact of the Mid-America merger related expense, return on average tangible stockholders' equity for the second quarter of 2008 would have approximated 16.18 percent.

Total assets grew to $4.11 billion as of June 30, 2008, up $1.79 billion from the $2.32 billion reported at the same time last year. The 12-month increase in assets includes organic growth of $542 million, or 23 percent, and $1.25 billion in assets acquired in conjunction with the Mid-America merger in November of last year.

CREDIT QUALITY

• Provision for loan losses was $2.79 million for the second quarter of 2008, compared to $900,000 in the second quarter of 2007.
  • During the second quarter of 2008, the firm recorded net charge-offs of $870,000, compared to net charge-offs of $317,000 during the same period in 2007. Annualized net charge-offs to total average loans were 0.07 percent for the six months ended June 30, 2008. The annualized provision for loan losses expressed as a percentage of average loans was 0.38 percent for the second quarter of 2008 compared to 0.23 percent for the same quarter last year.
  • The increase in provision for loan loss expense between the second quarter of 2008 and the second quarter of 2007 was primarily due to the significant increase in loan balances recorded during the second quarter of 2008 over the amount recorded in the second quarter of 2007.
• Allowance for loan losses represented 1.05 percent of total loans at June 30, 2008, compared to 1.04 percent a year ago.
  • The ratio of the allowance for loan losses to nonperforming loans was 243 percent at June 30, 2008, compared to 145 percent at Dec. 31, 2007 and 726 percent at June 30, 2007.

As noted above, Pinnacle reported that nonperforming loans and other real estate as a percentage of total loans and other real estate decreased from 0.78 percent at Dec. 31, 2007 to 0.73 percent at June 30, 2008. The following is a summary of the activity in various nonperforming asset categories for the quarter ended June 30, 2008:

		Balances			Payments and						Balances
(in thousands)		March 31, 2008			Reductions			Increases			June 30, 2008
Nonperforming loans:
Residential construction & development		$	8,815		$	10,623		$	6,984		$	5,176
Other			8,309			2,680			2,262			7,891
Totals			17,124			13,303			9,246			13,067
Other real estate:
Residential construction & development			2,318			4,682			10,263			7,899
Other			1,249			727			2,153			1,282
Totals			3,567			5,409			11,023			9,181
Total nonperforming assets		$	20,691 $			18,712		$	20,269		$	22,248

REVENUE

• Net interest income for second quarter 2008 was $27.68 million, compared to $17.66 million for the same quarter last year, an increase of 56.7 percent.
  • Net interest margin for the second quarter of 2008 was 3.24 percent, compared to a net interest margin of 3.58 percent for the same period last year and 3.37 for the first quarter of 2008.
• Noninterest income for second quarter 2008 was $9.06 million, a 63.2 percent increase over the $5.55 million recorded during the same quarter in 2007.

“We have anticipated compression in our net interest margins for the last several quarters,” said Harold Carpenter, chief financial officer of Pinnacle Financial Partners. “This compression continued during the second quarter of 2008. At this time, we are optimistic, based on our internal modeling, that further compression in our margins should be modest for the next few quarters. Additionally, we experienced another significant loan growth quarter. Our loan pipelines remain robust, which should provide increased core revenue growth in future periods.”

The 63.2 percent increase in noninterest income between the second quarter of 2007 and the second quarter of 2008 was due several factors, including a $1.0 million gain from the disposition of two branch locations as a result of the Mid-America acquisition; increased fee revenue as a result of the Mid-America merger; record investment sales commissions from Pinnacle Asset Management; and record gains on the sales of mortgage loans from the firm's mortgage origination unit. During the second quarter of 2008, Pinnacle's mortgage origination unit sold $79.69 million of mortgage loans compared to $52.20 million in 2007, an increase of 52.7 percent.

“As in so many other areas, Pinnacle is bucking national trends with its record investment sales commissions and record mortgage originations during the second quarter of 2008,” Turner said.

Noninterest income during the second quarter of 2008 represented approximately 24.66 percent of total revenues, compared to 23.92 percent for the same quarter in 2007.

NONINTEREST EXPENSE

• Noninterest expense for the quarter ended June 30, 2008, was $23.07 million ($21.73 million, excluding merger expenses) compared to $25.49 million ($22.39 million, excluding merger expenses) in the first quarter of 2008 and $14.48 million in the second quarter of 2007.
• Compensation expense was $12.50 million during the second quarter of 2008, compared to $13.87 million during the first quarter of 2008 and $8.79 million during the second quarter of 2007. Total full-time equivalent employees were 704.5 at June 30, 2008, compared to 702.0 at Dec. 31, 2007, and 441.0 at June 30, 2007. Linked quarter compensation expense was lower due to lower average headcount during the second quarter of 2008 compared to the first quarter of 2008, reduced incentive expense and increased loan origination activity that contributed to increased deferred lending charges.
• Merger related expense was $1.35 million during the quarter ended June 30, 2008 and was composed primarily of $1.03 million in retention bonus accruals for former Mid-America associates.
• The efficiency ratio (noninterest expense divided by net interest income and noninterest income) was 62.8 percent during the second quarter of 2008 compared to 71.4 percent for the first quarter of 2008 and 62.4 percent in the second quarter of 2007. Excluding merger related expenses, the efficiency ratio was 59.1 percent in the second quarter of 2008.

Carpenter noted that the firm will continue to make investments in future growth and, consequently, anticipates increased noninterest expense (excluding merger related expense) for the last half of 2008 of approximately 2 to 3 percent over the amount the firm has experienced during the first six months of 2008, primarily attributable to increasing headcount and other variable costs associated with the growth of the firm.

INVESTMENTS IN FUTURE GROWTH

• Pinnacle has hired 27 highly experienced associates for its denovo expansion to Knoxville that was announced on April 9, 2007. Loans outstanding in Knoxville at June 30, 2008 were $207 million, which is $45 million ahead of our original target disclosed at the time the Knoxville expansion was announced. Pinnacle has negotiated a site for construction of another full service location in the Fountain City area of Knoxville, currently scheduled to open during the first quarter of 2009.
• Pinnacle also has initiated construction of a new Dickson County location in the Nashville MSA to replace the current temporary location. The new facility is scheduled to open in the fourth quarter of 2008.
• On July 2, 2008, Pinnacle announced the acquisition of Murfreesboro, Tenn.- based Beach and Gentry Insurance LLC. Beach & Gentry has 18 associates and 4,000 clients. Miller & Loughry, Pinnacle’s wholly-owned insurance agency, also located in Murfreesboro, has 22 associates and 6,300 clients. The combined company, Miller Loughry Beach, is the largest independent insurance agency headquartered in Rutherford County.
• Pinnacle's total associate base at June 30, 2008, was 704.5 full-time equivalents (FTEs) compared to 441.0 at June 30, 2007. Approximately 220 FTEs were added to Pinnacle's associate base in conjunction with the Mid-America merger. Pinnacle also anticipates hiring 29 associates during the remainder of 2008.

NASHVILLE HOUSING MARKET UPDATE

• Market Graphics Research Group reports both the developed lot inventory and inventory of unoccupied new homes in the Nashville MSA appear to have peaked in February of 2008. The developed lot inventory increased from 24,809 lots in June 2006 to 37,760 lots in February 2008 and down to 37,056 lots in June 2008. Unoccupied new homes increased from 2,228 homes in June 2006 to 4,353 homes in February 2008 and were down to 3,990 homes in June 2008.
• The Greater Nashville Realtors Association reported residential closings down 28 percent in June 2008 in comparison to June 2007, essentially the same year over year decrease since September of 2007. At June 30, 2008, the inventory of residential homes was less than an eight month supply based on June 2008 closings, while condominium inventory was approximately a five month supply, again based on June 2008 closings. The Greater Nashville Realtors Association also reported that the median residential home sales price for the three months ended June 30, 2008 averaged $183,600, which was up 2.9 percent from the three months ended March 31, 2008.

INVESTMENT OUTLOOK

Management has developed several financial forecast scenarios for the next several quarters. Based on anticipated growth trends and future investments in the franchise, including the impact of the Knoxville expansion, Pinnacle estimates its third quarter 2008 diluted earnings per share will approximate $0.35 to $0.40, including merger related expense, or $0.38 to $0.43, excluding merger related expense. Pinnacle estimates its 2008 diluted earnings per share will approximate $1.36 to $1.44, including merger related expense, or $1.54 to $1.62, excluding merger related expense.

Merger related expense should approximate $2.0 million to $2.5 million for the remainder of 2008 with substantially the entire amount being attributable to retention awards for former Mid-America associates. Pinnacle anticipates no additional Mid-America merger related expense after 2008.

As noted previously, management has developed several scenarios under which these estimates can be achieved and believes these estimates to be reasonable based on these scenarios. However, unanticipated events or developments, including, but not limited to the development of any markets other than metropolitan Nashville or Knoxville, any merger or acquisition, the opportunity to hire more seasoned professionals than anticipated, increased volatility in interest rates, deterioration in national or local economic conditions in excess of expectation, materially adverse developments in our borrowers' ability to repay their loans, any activity in the capital markets which would cause Pinnacle to conclude that there was impairment of any asset including intangible assets, or the ability to grow loans significantly in excess of the levels contemplated, may cause the actual results of Pinnacle to differ materially from these estimates.

Pinnacle Financial Partners provides a full range of banking, investment, mortgage and insurance products and services designed for small- to mid-sized businesses and their owners, real estate professionals and individuals interested in a comprehensive relationship with their financial institution. Comprehensive wealth management services, such as financial planning and trust, help clients increase, protect and distribute their assets. The firm also has a well-established expertise in commercial real estate.

The firm began operations in a single downtown Nashville location in October 2000 and has since grown to $4.1 billion in assets. In 2007, Pinnacle launched an expansion into Knoxville, another high growth MSA. The addition of Mid-America has made Pinnacle the second-largest bank holding company headquartered in Tennessee, with 31 offices in eight Middle Tennessee counties and two in Knoxville.

Additional information concerning Pinnacle can be accessed at www.pnfp.com.

Certain of the statements in this release may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words "expect," "anticipate," "intend," "plan," "believe," "seek," "estimate" and similar expressions are intended to identify such forward-looking statements, but other statements not based on historical information may also be considered forward-looking. All forward-looking statements are subject to risks, uncertainties and other facts that may cause the actual results, performance or achievements of Pinnacle to differ materially from any results expressed or implied by such forward-looking statements. Such factors include, without limitation, (i) unanticipated deterioration in the financial condition of borrowers resulting in significant increases in loan losses and provisions for those losses, (ii) the inability of Pinnacle to continue to grow its loan portfolio at historic rates in the Nashville-Davidson-Murfreesboro-Franklin MSA and the Knoxville MSA, (iii) increased competition with other financial institutions, (iv) lack of sustained growth in the economy in the Nashville-Davidson-Murfreesboro-Franklin MSA and the Knoxville MSA, (v) rapid fluctuations or unanticipated changes in interest rates, (vi) the inability of Pinnacle to satisfy regulatory requirements for its expansion plans, (vii) the inability of Pinnacle to execute its expansion plans and (viii) changes in state and Federal legislation or regulations applicable to financial services providers, including banks. Additionally, risk factors exist in connection with Pinnacle’s merger with Mid-America including, among others, (1) the risk that the cost savings and any revenue synergies from the merger may not be realized or take longer than anticipated, (2) disruption from the merger with customers, suppliers or employee relationships, and (3) the risk of successful integration of the two companies’ businesses. Many of such factors are beyond Pinnacle's ability to control or predict, and readers are cautioned not to put undue reliance on such forward-looking statements. Pinnacle disclaims any obligation to update or revise any forward-looking statements contained in this release, whether as a result of new information, future events or otherwise.

PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS – UNAUDITED
		June 30, 2008				December 31, 2007
ASSETS
Cash and noninterest-bearing due from banks		$	77,109,394			$	76,941,931
Interest-bearing due from banks			1,758,085				24,706,966
Federal funds sold and other			66,342,642				20,854,966
Cash and cash equivalents			145,210,121				122,503,863
Securities available-for-sale, at fair value			509,972,917				495,651,939
Securities held-to-maturity (fair value of $11,161,324 and $26,883,473 at June 30, 2008 and December 31, 2007, respectively)			11,241,469				27,033,356
Mortgage loans held-for-sale			16,507,630				11,251,652
Loans			3,032,272,183				2,749,640,689
Less allowance for loan losses			(31,788,776	)			(28,470,207	)
Loans, net			3,000,483,407				2,721,170,482
Premises and equipment, net			67,096,558				68,385,946
Other investments			25,208,539				22,636,029
Accrued interest receivable			16,185,503				18,383,004
Goodwill			241,988,969				243,573,636
Core deposit intangible, net			17,177,922				17,325,988
Other assets			54,981,917				46,254,566
Total assets		$	4,106,054,952			$	3,794,170,461
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing		$	438,458,200			$	400,120,147
Interest-bearing			390,956,511				410,661,187
Savings and money market accounts			719,961,996				742,354,465
Time			1,603,136,919				1,372,183,317
Total deposits			3,152,513,626				2,925,319,116
Securities sold under agreements to repurchase			183,188,428				156,070,830
Federal Home Loan Bank advances and other borrowings			187,314,802				141,666,133
Subordinated debt			82,476,000				82,476,000
Accrued interest payable			8,328,868				10,374,538
Other liabilities			10,523,794				11,653,550
Total liabilities			3,624,345,518				3,327,560,167
Stockholders’ equity:
Preferred stock, no par value; 10,000,000 shares authorized; no shares issued and outstanding			-				-
Common stock, par value $1.00; 90,000,000 shares authorized; 22,587,564 issued and outstanding at June 30, 2008 and 22,264,817 issued and outstanding at December 31, 2007			22,587,564				22,264,817
Additional paid-in capital			393,742,295				390,977,308
Retained earnings			67,577,903				54,150,679
Accumulated other comprehensive loss, net of taxes			(2,198,328	)			(782,510	)
Stockholders’ equity			481,709,434				466,610,294
Total liabilities and stockholders’ equity		$	4,106,054,952			$	3,794,170,461

PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME – UNAUDITED
		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2008			2007			2008			2007
Interest income:
Loans, including fees		$	42,227,538		$	30,555,889		$	87,619,700		$	59,533,113
Securities:
Taxable			4,792,481			3,394,359			9,429,758			6,740,479
Tax-exempt			1,339,732			693,417			2,690,769			1,362,936
Federal funds sold and other			414,118			864,198			1,195,035			1,610,577
Total interest income			48,773,869			35,507,863			100,935,262			69,247,105
Interest expense:
Deposits			17,719,109			14,456,629			38,804,742			27,993,892
Securities sold under agreements to repurchase			567,090			1,890,743			1,399,143			3,602,834
Federal Home Loan Bank advances and other borrowings			2,805,541			1,499,436			5,690,127			2,906,896
Total interest expense			21,091,740			17,846,808			45,894,012			34,503,622
Net interest income			27,682,129			17,661,055			55,041,250			34,743,483
Provision for loan losses			2,787,470			899,998			4,378,593			1,687,964
Net interest income after provision for loan losses			24,894,659			16,761,057			50,662,657			33,055,519
Noninterest income:
Service charges on deposit accounts			2,684,486			1,920,085			5,258,223			3,717,234
Investment services			1,220,247			850,207			2,488,495			1,584,767
Insurance sales commissions			589,488			628,953			1,653,151			1,265,915
Gain on loans and loan participations sold, net			879,824			638,895			1,535,912			1,002,201
Net gain on sale of premises			1,010,881			-			1,010,881			56,078
Trust fees			531,458			425,205			1,036,458			845,495
Other noninterest income			2,142,101			1,088,172			4,442,768			2,105,410
Total noninterest income			9,058,485			5,551,517			17,425,888			10,577,100
Noninterest expense:
Salaries and employee benefits			12,502,540			8,794,853			26,369,277			17,061,354
Equipment and occupancy			3,226,932			2,412,528			7,503,205			4,577,230
Marketing and other business development			478,507			430,291			854,378			682,026
Postage and supplies			843,287			524,197			1,491,627			979,114
Amortization of core deposit intangible			758,033			515,755			1,524,066			1,031,508
Other noninterest expense			3,916,573			1,806,680			6,369,214			3,276,764
Merger related expense			1,349,276			-			4,455,039			-
Total noninterest expense			23,075,148			14,484,304			48,566,806			27,607,996
Income before income taxes			10,877,996			7,828,270			19,521,739			16,024,623
Income tax expense			2,916,863			2,402,405			5,495,816			4,996,918
Net income		$	7,961,133		$	5,425,865		$	14,025,923		$	11,027,705
Per share information:
Basic net income per common share		$0.36			$0.35			$0.63			$0.71
Diluted net income per common share		$0.34			$0.33			$0.60			$0.66
Weighted average shares outstanding:
Basic			22,356,667			15,494,522			22,248,292			15,464,151
Diluted			23,629,234			16,664,213			23,519,844			16,640,977

PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES
ANALYSIS OF INTEREST INCOME AND EXPENSE, RATES AND YIELDS-UNAUDITED
(dollars in thousands)	Three months ended June 30, 2008								Three months ended June 30, 2007
	Average Balances			Interest			Rates/ Yields		Average Balances			Interest			Rates/ Yields
Interest-earning assets:
Loans	$	2,941,973		$	42,228		5.77%		$	1,598,967		$	30,556		7.66%
Securities:
Taxable		380,733			4,792		5.06%			272,024			3,394		5.00%
Tax-exempt (1)		136,216			1,340		5.22%			75,057			693		4.89%
Federal funds sold and other		41,931			414		4.42%			58,836			865		6.08%
Total interest-earning assets		3,500,853		$	48,774		5.66%			2,004,884		$	35,508		7.15%
Nonearning assets
Intangible assets		259,217								125,020
Other nonearning assets		153,449								99,323
Total assets	$	3,913,519							$	2,229,227
Interest-bearing liabilities:
Interest-bearing deposits
Interest checking	$	379,714		$	1,339		1.42%		$	254,171		$	2,147		3.39%
Savings and money market		702,933			2,722		1.56%			501,373			4,239		3.39%
Certificates of deposit		1,466,685			13,658		3.75%			646,251			8,071		5.01%
Total interest-bearing deposits		2,549,332			17,719		2.80%			1,401,795			14,457		4.14%
Securities sold under agreements to repurchase		174,847			567		1.30%			172,872			1,891		4.39%
Federal Home Loan Bank advances and other borrowings		208,773			1,687		3.20%			47,998			621		5.19%
Subordinated debt		82,476			1,119		5.46%			51,548			878		6.84%
Total interest-bearing liabilities		3,015,428			21,092		2.81%			1,674,213			17,847		4.28%
Noninterest-bearing deposits		398,337			-		-			276,241			-		-
Total deposits and interest-bearing liabilities		3,413,765		$	21,092		2.48%			1,950,454		$	17,847		3.67%
Other liabilities		22,252								14,718
Stockholders' equity		477,502								264,055
	$	3,913,519							$	2,229,227
Net interest income				$	27,682							$	17,661
Net interest spread (2)							2.85%								2.88%
Net interest margin (3)							3.24%								3.58%
(1) Yields computed on tax-exempt instruments on a tax equivalent basis.
(2) Yields realized on interest-earning assets less the rates paid on interest-bearing liabilities.
(3) Net interest margin is the result of annualized net interest income calculated on a tax equivalent basis divided by average interest-earning assets for the period.

PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES
ANALYSIS OF INTEREST INCOME AND EXPENSE, RATES AND YIELDS-UNAUDITED
(dollars in thousands)	Six months ended June 30, 2008								Six months ended June 30, 2007
	Average Balances			Interest			Rates/ Yields		Average Balances			Interest			Rates/ Yields
Interest-earning assets:
Loans	$	2,851,859		$	87,620		6.18%		$	1,564,869		$	59,533		7.67%
Securities:
Taxable		373,929			9,430		5.07%			272,346			6,740		4.99%
Tax-exempt (1)		136,453			2,691		4.60%			74,009			1,363		4.90%
Federal funds sold and other		50,412			1,195		4.95%			57,367			1,611		5.66%
Total interest-earning assets		3,412,653		$	100,935		5.98%			1,968,591		$	69,247		7.14%
Nonearning assets
Intangible assets		259,012								123,874
Other nonearning assets		172,116								97,113
Total assets	$	3,843,781							$	2,189,578
Interest-bearing liabilities:
Interest-bearing deposits
Interest checking	$	392,011		$	3,468		1.78%		$	249,425		$	4,104		3.32%
Savings and money market		719,416			6,820		1.91%			498,625			8,364		3.38%
Certificates of deposit		1,419,792			28,517		4.04%			635,172			15,526		4.93%
Total interest-bearing deposits		2,531,219			38,805		3.08%			1,383,222			27,994		3.41%
Securities sold under agreements to repurchase		171,997			1,399		1.64%			165,026			3,603		4.40%
Federal Home Loan Bank advances and other borrowings		176,287			3,112		3.49%			44,120			1,152		5.04%
Subordinated debt		82,476			2,578		6.28%			51,548			1,755		6.86%
Total interest-bearing liabilities		2,961,979			45,894		3.12%			1,643,916			34,504		4.23%
Noninterest-bearing deposits		383,375			-		-			273,052			-		-
Total deposits and interest-bearing liabilities		3,345,354		$	45,894		2.76%			1,916,968		$	34,504		3.63%
Other liabilities		22,456								10,849
Stockholders' equity		475,971								261,761
	$	3,843,781							$	2,189,578
Net interest income				$	55,041							$	34,743
Net interest spread (2)							2.86%								2.91%
Net interest margin (3)							3.27%								3.61%
(1) Yields computed on tax-exempt instruments on a tax equivalent basis.
(2) Yields realized on interest-earning assets less the rates paid on interest-bearing liabilities.
(3) Net interest margin is the result of annualized net interest income calculated on a tax equivalent basis divided by average interest-earning assets for the period.

PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL DATA – UNAUDITED
(dollars in thousands)		June 2008				March 2008			Dec 2007			Sept 2007			June 2007			Mar 2007
Balance sheet data, at quarter end:
Total assets		$	4,106,055			3,888,900			3,794,170			2,368,079			2,315,327			2,193,132
Total loans			3,032,272			2,866,536			2,749,641			1,731,245			1,663,030			1,553,980
Allowance for loan losses			(31,789	)		(29,871	)		(28,470	)		(17,978	)		(17,375	)		(16,792	)
Securities			521,214			505,377			522,685			352,222			339,781			340,255
Noninterest-bearing deposits			438,458			429,289			400,120			316,542			294,631			306,885
Total deposits			3,152,514			2,967,025			2,925,319			1,826,884			1,797,536			1,700,132
Securities sold under agreements to repurchase			183,188			171,186			156,071			145,332			140,443			116,952
Advances from FHLB and other borrowings			187,315			168,606			141,666			55,671			46,699			46,619
Subordinated debt			82,476			82,476			82,476			51,548			51,548			51,548
Total stockholders’ equity			481,709			476,772			466,610			274,636			265,194			262,917
Balance sheet data, quarterly averages:
Total assets		$	3,913,519			3,774,042			2,791,669			2,378,501			2,229,227			2,149,928
Total loans			2,941,973			2,761,745			2,063,442			1,697,862			1,598,967			1,530,771
Securities			516,949			503,815			410,142			347,423			347,081			345,630
Total earning assets			3,500,853			3,324,452			2,541,799			2,151,583			2,004,884			1,932,298
Noninterest-bearing deposits			398,337			368,413			327,866			293,701			276,241			269,864
Total deposits			2,947,669			2,881,518			2,135,973			1,814,135			1,678,036			1,634,513
Securities sold under agreements to repurchase			174,847			169,146			201,605			194,774			172,872			157,180
Advances from FHLB and other borrowings			208,773			143,802			57,970			29,946			47,998			40,241
Subordinated debt			82,476			82,476			72,391			51,548			51,548			51,548
Total stockholders’ equity			477,502			474,439			309,431			271,653			264,055			259,466
Statement of operations data, for the three months ended:
Interest income		$	48,774			52,161			43,338			38,347			35,508			33,739
Interest expense			21,092			24,802			21,329			19,387			17,847			16,657
Net interest income			27,682			27,359			22,009			18,960			17,661			17,082
Provision for loan losses			2,787			1,591			2,260			772			900			788
Net interest income after provision for loan losses			24,895			25,768			19,749			18,188			16,761			16,294
Noninterest income			9,058			8,367			6,612			5,332			5,552			5,026
Noninterest expense			23,075			25,492			17,762			15,110			14,484			13,124
Income before taxes			10,878			8,644			8,599			8,410			7,828			8,196
Income tax expense			2,917			2,579			2,357			2,638			2,402			2,594
Net income		$	7,961			6,065			6,242			5,772			5,426			5,602
Profitability and other ratios:
Return on avg. assets (1)			0.82	%		0.65	%		0.89	%		0.96	%		0.98	%		1.06	%
Return on avg. equity (1)			6.71	%		5.14	%		8.00	%		8.43	%		8.24	%		8.76	%
Net interest margin (2)			3.24	%		3.37	%		3.49	%		3.54	%		3.58	%		3.64	%
Noninterest income to total revenue (3)			24.66	%		23.42	%		23.10	%		21.95	%		23.92	%		22.73	%
Noninterest income to avg. assets (1)			0.93	%		0.89	%		0.94	%		0.89	%		1.00	%		0.95	%
Noninterest exp. to avg. assets (1)			2.36	%		2.71	%		2.52	%		2.52	%		2.61	%		2.48	%
Efficiency ratio (4)			62.81	%		71.35	%		62.06	%		62.20	%		62.40	%		59.36	%
Avg. loans to average deposits			99.81	%		95.84	%		96.60	%		93.59	%		95.29	%		93.65	%
Securities to total assets			12.69	%		13.00	%		13.75	%		14.87	%		14.68	%		15.51	%
Average interest-earning assets to average interest-bearing liabilities			116.10	%		114.30	%		118.77	%		119.75	%		119.75	%		119.75	%
Brokered time deposits to total deposits			12.53	%		7.78	%		9.48	%		8.04	%		8.17	%		5.83	%

PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL DATA – UNAUDITED
(dollars in thousands)		June 2008				March 2008			Dec 2007			Sept 2007			June 2007			Mar 2007
Asset quality information and ratios:
Nonperforming assets:
Nonaccrual loans		$	13,067			17,124			19,677			2,364			2,392			4,705
Other real estate		$	9,181			3,567			1,673			878			687			927
Past due loans over 90 days and still accruing interest		$	2,272			2,002			1,613			633			606			98
Net loan charge-offs (6)		$	870			190			462			169			317			114
Allowance for loan losses to total loans			1.05	%		1.04	%		1.04	%		1.04	%		1.04	%		1.08	%
Allowance for loan losses to nonaccrual loans			243.3	%		174.4	%		144.7	%		760.5	%		726.4	%		356.9	%
As a percentage of total loans and ORE:
Past due accruing loans over 30 days			0.34	%		0.77	%		0.45	%		0.38	%		0.31	%		0.33	%
Nonperforming assets			0.73	%		0.72	%		0.78	%		0.19	%		0.19	%		0.36	%
Potential problem loans (5)			0.40	%		0.64	%		0.56	%		0.40	%		0.16	%		0.21	%
Annualized net loan charge-offs year-to-date to avg. loans (6)			0.07	%		0.03	%		0.07	%		0.05	%		0.06	%		0.03	%
Avg. commercial loan internal risk ratings (5)			4.0			4.1			4.1			4.1			4.1			4.1
Avg. loan account balances (7)		$	163			170			160			169			164			156
Interest rates and yields:
Loans			5.77	%		6.61	%		7.23	%		7.65	%		7.66	%		7.68	%
Securities			5.10	%		5.11	%		4.92	%		4.99	%		4.98	%		4.96	%
Total earning assets			5.66	%		6.37	%		6.82	%		7.12	%		7.15	%		7.13	%
Total deposits, including non-interest bearing			2.42	%		2.94	%		3.28	%		3.51	%		3.46	%		3.36	%
Securities sold under agreements to repurchase			1.30	%		1.98	%		3.36	%		4.20	%		4.39	%		4.42	%
FHLB advances and other borrowings			3.20	%		3.99	%		4.61	%		5.10	%		5.19	%		5.36	%
Subordinated debt			5.46	%		7.11	%		7.20	%		6.90	%		6.84	%		6.89	%
Total deposits and interest-bearing liabilities			2.48	%		3.04	%		3.43	%		3.68	%		3.67	%		3.59	%
Capital ratios (8):
Stockholders’ equity to total assets			11.7	%		12.3	%		12.3	%		11.6	%		11.5	%		12.0	%
Leverage			8.5	%		8.5	%		11.6	%		9.2	%		9.5	%		9.5	%
Tier one risk-based			9.3	%		9.5	%		9.5	%		10.4	%		10.4	%		10.9	%
Total risk-based			10.3	%		10.4	%		10.4	%		11.3	%		11.3	%		11.8	%

PINNACLE FINANCIAL PARTNERS, INC. AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL DATA – UNAUDITED
(dollars in thousands, except per share data)		June 2008				March 2008			Dec 2007			Sept 2007			June 2007			Mar 2007
Per share data:
Earnings – basic		$	0.36			0.27			0.35			0.37			0.35			0.36
Earnings – diluted		$	0.34			0.26			0.33			0.35			0.33			0.34
Book value at quarter end (9)		$	21.33			21.22			20.95			17.66			17.06			16.93
Weighted avg. shares – basic			22,356,667			22,331,398			17,753,661			15,503,284			15,494,522			15,433,442
Weighted avg. shares – diluted			23,629,234			23,484,754			19,110,851			16,609,328			16,664,213			16,617,484
Common shares outstanding			22,587,564			22,467,263			22,264,817			15,553,037			15,545,581			15,530,975
Investor information:
Closing sales price		$	20.09			25.60			25.42			28.82			29.36			30.51
High sales price during quarter		$	29.29			26.75			30.93			31.31			31.48			33.85
Low sales price during quarter		$	20.05			20.82			24.85			21.62			28.27			29.40
Other information:
Gains on sale of loans and loan participations sold:
Mortgage loan sales:
Gross loans sold		$	79,693			59,757			40,273			42,895			52,197			31,044
Gross fees (10)		$	1,364			1,114			750			659			846			544
Gross fees as a percentage of mortgage loans originated			1.71	%		1.86	%		1.86	%		1.54	%		1.62	%		1.75	%
Commercial loan participations sold		$	8			4			8			19			167			45
Gains on sales of investment securities, net		$	-			1			16			-			-			-
Brokerage account assets, at quarter-end (11)		$	826,000			859,000			878,000			590,000			643,000			617,000
Trust account assets, at quarter-end		$	527,000			493,000			464,000			512,000			475,000			400,000
Floating rate loans as a percentage of loans (12)			44.0	%		41.4	%		41.8	%		44.6	%		45.5	%		46.3	%
Balance of commercial loan participations sold to other banks and serviced by Pinnacle, at quarter end		$	125,308			113,701			110,352			125,370			115,913			114,143
Core deposits to total funding (13)			52.3	%		57.6	%		58.2	%		61.4	%		62.3	%		63.7	%
Risk-weighted assets			3,353,142			3,181,612			3,103,293			1,998,401			1,921,648			1,780,107
Total assets per full-time equivalent employee			5,828			5,669			5,415			5,257			5,250			5,228
Annualized revenues per full-time equivalent employee			209.8			209.5			161.8			213.9			211.1			210.8
Number of employees (full-time equivalent)			704.5			686.0			702.0			450.5			441.0			419.5
Associate retention rate (14)			90.9	%		92.0	%		89.7	%		89.4	%		88.1	%		85.3	%
Selected economic information (in thousands) (15):
Nashville MSA nonfarm employment			767.1			759.2			795.2			763.6			759.5			757.5
Knoxville MSA nonfarm employment			339.3			335.3			358.7			337.2