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Bank director resigned over
suspected insider trading tied to Avenue deal
Nashville Business Journal
bank director on Pinnacle Financial Partners Inc.'s board
resigned this month over alleged insider trading tied to the
Nashville bank's deal to acquire competitor Avenue Financial
Holdings Inc., according to a new filing with the Securities
According to the regulatory filing by Pinnacle on April 15,
a director on the executive committee of Pinnacle's board
allegedly bought shares in Avenue Bank’s holding company on
two separate occasions in January, while the two Nashville
banks were in the midst of discussing a potential
acquisition by Pinnacle.
Pinnacle's SEC filing does not name the director, and Nikki
Klemmer, a spokeswoman for the bank, declined to confirm the
director's identity. However, a prior regulatory filing
indicates that the bank director is James Cope, whose
immediate resignation was announced on April 1. The timing
of Cope's departure also matches the timeline Pinnacle
sketched out in Friday's filing.
Klemmer said the bank has "only had one [director] resign
Multiple attempts to reach Cope for comment by phone and
email Tuesday were unsuccessful.
Based on Pinnacle’s recent filing, the alleged purchases of
Avenue shares occurred after the Pinnacle board had been
notified of ongoing merger talks, including potential
financial terms, between management at the largest
Nashville-based bank (Nasdaq: PNFP) and the leadership at
one of its biggest local peers, Avenue Bank (Nasdaq: AVNU).
In total, the then-Pinnacle director allegedly bought 10,179
shares of Avenue common stock in the days after Pinnacle CEO
Terry Turner informed his board in early January that he was
in advanced discussions with his counterparts at Avenue
about a possible acquisition, according to the SEC filing by
Pinnacle Bank's parent company.
The April 15 filing details information for shareholders on
Pinnacle’s pending $200 million-plus acquisition of
Nashville rival Avenue, which stands to create a bank with
an estimated $10.8 billion assets, far and away the biggest
total among lenders headquartered in Nashville.
In its filing, Pinnacle said it learned of the alleged
Avenue common stock purchases by the director two months
after the fact, on March 21. Pinnacle said in the filing
that it believed the transactions "were in violation of
certain … policies applicable to Pinnacle’s directors.”
After that, “this director resigned from the board of
directors of each of Pinnacle [Financial Partners] and
Pinnacle Bank,” the bank said in the filing. On April 5,
“following the director’s resignation,” the Pinnacle board
met and “received an oral report of Pinnacle’s legal
counsel” and then reaffirmed and approved the merger
agreement with Avenue.
Klemmer declined comment when asked whether the bank was
aware of any formal investigations into the stock purchases.
It is currently unclear whether Cope has or will come under
investigation. A spokesperson for the SEC declined comment,
and efforts to reach the U.S. Attorney's Office for the
Middle District of Tennessee were not immediately
successful. There is no indication that Cope has been
charged with a crime.
"We have appropriate policies and procedures in place
regarding confidentiality, and those are applicable to
directors as well as associates. We believe appropriate
action has been taken by the firm, and we intend to
cooperate fully with any inquiry into this matter," Klemmer
When Cope's departure from the board at Pinnacle Financial
and its subsidiary Pinnacle Bank was reported by the
Nashville Post on April 4, a Pinnacle spokesperson said his
departure was not planned, and that "there were no
disagreements between him and the board."
Cope, an attorney in Murfreesboro who joined Pinnacle's
board when the Nashville bank bought Calvary Bank in 2006,
was also a member of Pinnacle’s executive committee.
According to the April 1 SEC filing, Cope notified the
bank's board of his resignation in writing that day.
Based on Pinnacle’s filing last Friday, the first alleged
purchase of Avenue shares by the Pinnacle director occurred
on Jan. 5. On that day, Pinnacle's CEO told the executive
committee of Pinnacle’s board that he was discussing a
possible acquisition with Avenue, according to the filing.
"Possible financial terms" of the potential transaction were
made available to Pinnacle board members "in advance of the
In December 2015, Turner first told his board he had
attempted to contact his counterpart Ron Samuels, chairman
and CEO of Avenue Bank, and Marty Dickens, a member of
Avenue's board, about a possible transaction.
On Dec. 8, 2015, Turner told Samuels that "Pinnacle may be
able to offer a purchase price near the top end of the
$13.70 to $19.18 per share range," according to the Friday's
On Jan. 6, Turner sent a letter to Avenue's board that
included a non-binding offer of between $19 and $20 per
share, based on details outlined in Pinnacle's April 15
filing. In the letter, Turner "highlighted the significant
premium this offer represented to Avenue's public offering
price from its initial public offering [$11 per share] and
Avenue's then trading price."
According to Pinnacle's SEC filing, the second alleged
purchase of Avenue shares by the director occurred on Jan.
11, the day that Avenue and Pinnacle entered a mutual
nondisclosure and confidentiality agreement. After that,
Avenue began to give Pinnacle detailed financial information
to work on the potential acquisition.
Around those days in early January, Avenue stock traded
hands for approximately $13.50 per share.
The two bank boards inked their deal on Jan. 28. Pinnacle's
offer valued Avenue at $19.29 per share. As we reported,
Pinnacle's offer was more than 40 percent higher than what
Avenue shares traded at just prior to the deal’s
announcement after markets closed on Jan. 28. At 2.2 times
Avenue’s book, Pinnacle’s offer for Avenue is considerably
higher than the median price acquiring banks have paid for
other lenders across the country in the past year, according
to research from Atlanta investment banking firm Banks
As of March 31, Pinnacle had $9.3 billion in assets, the
largest total for a bank headquartered in Nashville. Over
the past year, the bank has bought two other lenders in the
state. It's currently mired in a legal dispute with First
Tennessee Bank over hiring practices in Memphis.
On Pinnacle's policies and procedures surrounding insider
trading, Klemmer, with Pinnacle, said this: "Our board is
advised of the risks around misuse of material nonpublic
information regarding our company and other companies that
we have dealings with. As recently as October 2015, Pinnacle
conducted a board training focused on compliance with
insider trading laws, among other things."
"We limit access to material, nonpublic information to
essential personnel or board members," she added. "We
communicate clearly when information is nonpublic or
material that it should remain confidential."