Pinnacle Financial Partners, Inc. · NYSE:PNFP
Pinnacle Financial Partners — Q4 2009 Earnings Presentation
32 slides from Pinnacle Financial Partners's earnings presentation, Jan 20, 2010
Slide 1: Fourth Quarter 2009 Investor Call
Fourth Quarter 2009 Investor Call Terry Turner, President and CEO Harold Carpenter, EVP and CFO Harvey White, White Chief Credit Officer January 20, 2010
Slide 2: Safe Harbor Statements
Safe Harbor Statements Forward‐looking statements Certain of the statements in this release may constitute forward‐looking statements within the meaning of Section 27A of the Securities Act of 1933, 1933 as amended, amended and Section 21E of the Securities Exchange Act of 1934, 1934 as amended. ame
Slide 3: Opening Comments: Two Important Themes
Opening Comments Two Important Themes • Focus on aggressively dealing with credit issues • Continue to build the core earnings capacity of the firm
Slide 4: Opening Comments: Dealing with Credit Issues
Opening Comments Two Important Themes • Aggressively dealing with credit issues • Increased ALLL to total loans of 2.58% • 4th Q Qtr annualized a ua ed NCO’s O s of o 0.75% 0 5% • Annual NCO’s of 1.71%, or 1.11% excluding Silverton • Increased NPAs to total loans + ORE of 4.29% • Approximately $42 m
Slide 5: Opening Comments: Building Core Earnings Capacity
Opening Comments Two Important Themes • Building the core earnings capacity of the firm • Year over year loan growth of 6% • 4Q09 lloan decrease d off $45 million illi • Core funding growth of 25% • Net interest income growth of 24%
Slide 6: Loan Categories
Loan Categories Comparison of 4Q09 to year end 2008 *Continued reduction in C&D exposure Amts. %’s Amts. %’s Amts. %’s 4Q09 4Q09 3Q09 3Q09 4Q08 4Q08 C&D and Land $ 525.3 14.7% $ 583.9 16.2% $ 645.4 19.2% Consumer RE 756.0 21.2% 754.4 20.9% 675.6 20.1% CRE – Owner Occ. 535.1 15.0% 556.0 15.4% 371.6 1
Slide 7: Construction and Land Categories
Construction and Land Categories Comparison of 4Q09 to year end 2008 * PNFP continues to reduce exposure to residential construction and development Amts. %’s(*) Amts. %’s(*) Amts. %’s (*) 4Q09 3Q09 4Q08 4Q09 3Q09 4Q08 Resid – Spec $ 44 44.2 2 1.2% $ 59 59.6 6 1.7% $ 96 96.9 9 2.9% Resid - Custom 18
Slide 8: Construction and Land Categories
Construction and Land Categories Comparison of 4Q09 to year end 2008 * Continued reduction in C&D exposure $300 $250 $200 Resi Spec $150 Resi Cust Resi Condo $100 Resi Land $50 $ $0 4Q08 1Q09 2Q09 3Q09 4Q09
Slide 9: Commercial Real Estate
Commercial Real Estate Commercial Real Estate Categories at Dec. 31, 2009 Nashville CRE Vacancy Rates (*) ( ) PNFP CRE Portfolio 3Q09 2Q09 Warehouse 9.0% 8.2% Other M ltif il Multifamily 9 3% 9.3% 10 6% 10.6% 14.8% Retail 7.0% 7.2% Warehse Office 13.3% 14.3% 9.4% Own/Occ (*) Colliers, Red Capital, N
Slide 10: Asset Quality Metrics
Asset Quality Metrics Past Dues and NPLs Expressed as a % of Total Loans within Category PNFP PNFP PNFP Peer PNFP PNFP PNFP Peer 30 90 30-90 30 90 30-90 30 90 30-90 30 90 30-90 NPLs NPLs NPLs NPLs days days days days and > 90 and > 90 and > 90 and > 90 past due past due past due past due days days d
Slide 11: Asset Quality Metrics
Asset Quality Metrics Other $124.7 MM nonaccruing loans 0.9% 3.50% of loan balances Land Resid Const D l Develop Nonaccrual loans $124.7 23.4% 34.7% ORE 29.6 Total NPA’s $154.3 NPA’s as a % of C&I Total loans + ORE 4.29% 13.0% 1‐4 As of December 31, 31 2009 Family CRE 10.2% 17.8%
Slide 12: Asset Quality Metrics: Nonperforming Loans
Asset Quality Metrics Nonperforming loans • Largest g NPL’s • #1 ‐ $11.7 mm retail shopping complex • #2 ‐ $11.3 mm condo developer • #3 ‐ $8.8 mm residential development • #4 ‐ $6.8 mm condo developer • Approximately 285 accounts make up remaining NPLs • All NPL’s are in our primary markets
Slide 13: Asset Quality Metrics: ORE Classifications
Asset Quality Metrics ORE Classifications Balances Fair value as a % Average Dec. 31, 2009 of book value Appraisal Age in (dollars in thousands) (dollars in thousands) Months ORE classifications: New home construct $ 2,829 124% 4.71 Developed lots 656 148% 5.55 Undeveloped land 22 317 22,317 118% 6
Slide 14: Asset Quality Metrics: Net Charge-offs
Asset Quality Metrics Net Charge‐off’s • Largest g Charge‐off’s g duringg 4Q09 Q • #1 ‐ $838,000 builder/developer • #2 ‐ $794,000 $794 000 builder/developer • #3 ‐ $635,000 builder/developer • #4 ‐ $587,000 $ land subdivider
Slide 15: Balance Sheet Strength
Balance Sheet Strength Strong capital base Dec. 31,, Sept. 30, Sept 30 June 30,, March 31,, Dec. 31,, 2009 2009 2009 2009 2008 Tangible common equity 7.3% 7.5% 7.4% 6.0% 6.2% Tangible common to risk weighted assets 8.9% 9.1% 9.0% 7.4% 7.5% Tier 1 leverage 10.7% 10.9% 11.1% 9.7% 10.5% Tier 1 risk bas
Slide 16: Funding sources
Funding sources Positive trends in funding continue Year over year % Balances at Balances at change Dec. 31, 2009 % of Total Dec. 31, 2008 % of Total Core Funding: Noninterest‐bearing deposit accounts 17.3% 498,087 11.3% 424,757 10.4% Interest‐bearing demand accounts 28.5% 483,274 11.0% 375,993 9.2%
Slide 17: Net Interest Income
Net Interest Income 4Q09 3Q09 2Q09 1Q09 4Q08 Loan income $42,453 $41,666 $39,627 $38,526 $43,433 Loan yields 4.71% 4.61% 4.52% 4.57% 5.27% Investment income $10,766 $10,302 $9,967 $10,563 $9,366 Investment yields 4.55% 4.67% 4.60% 5.18% 5.40% Total IB deposit expense $13,875 $15,100 $16,420 $17,734
Slide 18: Net Interest Income
Net Interest Income • Margin expansion in 4Q09 • Core fundingg continues to replace p non‐core fundingg sources ‐ driving lower funding costs • Impact of NPA’s • NPA’s impact margin in Q4 and will continue in 2010 • Improving margin trends for 2010 • Variable rate loan pricing opportunities • CD rep
Slide 19: Net Interest Income: Loan Repricing
Net Interest Income • Loan repricing opportunities ‐ $355 million of loans maturing and repricing in next six months. Goal at renewal should be > 5.00% rate. Loans ‐ $ Loans – Avg Yield (%) January 2010 $61.0 3.91% February 2010 $66 5 $66.5 4 06% 4.06% March 2010 $45.9 3.86% April 2010 $72.3 4.15% M
Slide 20: Net Interest Income: CD Repricing
Net Interest Income • CD repricing opportunities ‐ $828mm in CD’s maturing in six months. Goal at renewal should be approx. 0.75% to 1.25% for brokered and 1.25% to 2.00% for customer CD CD’ss or transfer borrowers to money market accounts. Brokered Brokered CD’s – Client CD’s ‐ $ Client CD’s – CD’s
Slide 21: Provision expense
Provision expense 4Q09 3Q09 2Q09 1Q09 4Q08 Components of provision: Net loan growth $ (1,157) $ 1,465 $ 1,321 $ 1,548 $1,642 N t charge Net h offs ff 6 718 6,718 5 228 5,228 44 579 44,579 4 760 4,760 2 068 2,068 Other (*) 10,133 15,441 19,420 7,302 ‐ Total provision expense $ 15,694 $22,134 $65,320
Slide 22: Building the core earnings capacity
Building the core earnings capacity 4Q09 3Q09 2Q09 1Q09 4Q08 Net interest income $37,031 $34,548 $30,512 $28,700 $29,892 Total noninterest income 8,176 7,737 10,602 13,136 8,040 Total revenue 45 207 45,207 42 285 42,285 41 114 41,114 41 836 41,836 37 932 37,932 Total noninterest expense 35,448 27,28
Slide 23: Extremely Attractive Competitive Landscapes: Nashville
Extremely Attractive Competitive Landscapes Nashville 80% 70.51% 70% Market Sharre 60% 50% 44.06% 40% Aggregate M 30% Aggregate market share for the big 3 in Nashville MSA has 20% declined almost 26.5% in the last 9 years. 10% 0% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Top 3 banks in
Slide 24: Extremely Attractive Competitive Landscapes: Knoxville
Extremely Attractive Competitive Landscapes Knoxville 70% 66.62% 65% hare Aggregatte Market Sh 60% 55% 53.51% Aggregate market share for the big 3 in Knoxville MSA has 50% declined >13% in the last 10 years. 45% 40% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Top 3 banks in Knox
Slide 25: Final Thoughts
Final Thoughts • Aggressively addressing problem credits • Modest reserve buildingg mayy continue in 2010 • Pursue meaningful NPA resolution • Continued reductions in exposure to C&D • Responsibly growing core earnings capacity • Managed loan growth < 5% • Core funding growth • Net interest income g
Slide 26: Q&A Fourth Quarter 2009 Investor Call
Q&A Fourth Quarter 2009 Investor Call Terry Turner, President and CEO Harold Carpenter, EVP and CFO Harvey White, White Chief Credit Officer January 20, 2010
Slide 27: Supplemental Information
S Supplemental l t l IInformation f ti Fourth Quarter 2009 Investor Call Terry Turner, President and CEO Harold Carpenter, EVP and CFO Harvey White, White Chief Credit Officer January 20, 2010
Slide 28: Balance Sheet Strength: Bond Portfolio
Balance Sheet Strength Conservative bond portfolio Average yield on bond Corporates Treasuries portfolio f li = 4.66% % 1.1% 5.2% Average life = 4.3 years Municipals As of December 31, 2009 21.8% MBS pass Agency thrus Notes Agency 50.5% 20.3% CMOs 1.1% FNMA, FHLMC and GNMA
Slide 29: Fee income
Fee income 4Q09 3Q09 2Q09 1Q09 4Q08 Service charges $2,595 $2,559 $2,568 $2,477 $2,699 Investment services 1,136 1,112 1,078 854 1,164 Insurance commissions 895 906 919 1 305 1,305 908 Gains on loan sales 1,108 900 1,633 1,288 1,048 Trust fees 706 586 642 658 557 Other: Gain on sales of - - 2,116 4,
Slide 30: Fees for 2009
Fees for 2009 • Service charges projected to be flat in 2010 • p Investment and trust revenues expected to fluctuate with markets • Mortgage origination fees down from highs of 2009 but expected to continue current 4Q09 pace into 2010 • Other noninterest income projected to remain at current levels
Slide 31: Expenses
Expenses 4Q09 3Q09 2Q09 1Q09 4Q08 Salaries and benefits $15,037 $14,245 $13,747 $13,679 $12,058 Incentive Expense - - (1,072) 1,072 (2,043) Equipment and occupancy 5,064 4,446 4,310 4,235 3,935 Other real estate owned 8,393 1,250 3,914 701 1,118 Marketing and BD 1,116 512 466 440 680 Postage 755 515
Slide 32: Expenses for 2009
Expenses for 2009 • FTE’s at 777 at December 31, compared to 719.0 at Dec ’08. Anticipate 50 new hires in 2010. • Occupancy O andd equipment i will ill experience i increases i in i 2010 due d to new branch facilities coming on line in Q4’09 and early 2010. • ORE expenses were comparatively high in
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