Pinnacle Financial Partners, Inc. · NYSE:PNFP
Pinnacle Financial Partners — Q1 2009 Earnings Presentation
33 slides from Pinnacle Financial Partners's earnings presentation, Apr 21, 2009
Slide 1: Pinnacle Financial Partners, Inc. First Quarter 2009 Earnings
Pinnacle Financial Partners, Inc. First Quarter 2009 Earnings Terry Turner, President and CEO Harold Carpenter, EVP and CFO April p 21,, 2009
Slide 2: Safe Harbor Statements
Safe Harbor Statements Forward--looking statements Forward Pinnacle Financial Partners, Inc. (“Pinnacle Financial”) may from time to time make written or oral statements, including statements contained in this presentation which may constitute forward-looking statements within the meaning of Section
Slide 3: Opening Comments
Opening Comments • Continued economic deterioration, particularly in real estate • Effectively dealing with credit issues • I Increased d our reserve to t 1.30% 1 30% off ttotal t l lloans • Reassigned problem assets to our most experienced workout specialists p • Credit metrics generally still outp
Slide 4: Financial Highlights
Financial Highlights • Net income and EPS • 1Q09 net income available to common stockholders of $643,000 compared to $6.0 million in 1Q08 • FDEPS of $0.03 in 1Q09 compared to $0.26 in 1Q08. Includes $1.45 million in TARP preferred stock charges. • Loan growth – Loans up $119 million in 1Q09. Pipelin
Slide 5: Balance Sheet Strength
Balance Sheet Strength Strong capital base March 31 31, December D b 31, 31 2009 2008 Tangible common equity ratio 6.0% 6.1% Tier 1 Leverage 9.7% 10.5% Tier 1 risk based capital 11.8% 12.1% Total risk based capital 13.3% 13.5% Tangible Common Book Value per Common Share $11.75 $11.70
Slide 6: Balance Sheet Strength: Conservative bond portfolio
Balance Sheet Strength Conservative bond portfolio Average yield A i ld on bond b d portfolio = 5.24% A Average lif life = 2 2.5 5 years As of March 31, 2009 FNMA, FHLMC and GNMA
Slide 7: Balance Sheet Strength: Diversified loan portfolio
Balance Sheet Strength Diversified loan portfolio PNFP avoided: • Sub prime • Indirect auto • Credit card • Student lending • SBA loans only 0.2% of book
Slide 8: Balance Sheet Strength: Loan categories
Balance Sheet Strength Loan Amts. %’s Amts. %’s Categories 1Q09 1Q09 4Q08 4Q08 C&D and Land $ 663.4 19.1% $ 645.4 19.2% Consumer RE 710.3 20.5% 675.6 20.1% CRE – Owner Occ. 408.1 11.7% 371.6 11.1% CRE – Investment 566.5 16.3% 554.9 16.6% Other RE loans 46.7 1.3% 50.4 1.5% Total real estate 2,395.0 6
Slide 9: Construction and Land Categories
B l Balance Sheet Sh t Strength St th Construction and Land Categories Amts. Amts % s( ) %’s(*) Amts. Amts % s (*) %’s () 1Q09 1Q09 4Q08 4Q08 Resid – Spec $ 93.7 2.7% $ 96.9 2.9% Resid - Custom 25 9 25.9 0 7% 0.7% 29 0 29.0 0 9% 0.9% Resid - Condo 55.4 1.6% 48.5 1.4% Comm Construct. 86.3 2.5% 77.1 2
Slide 10: Asset Quality Metrics
Asset Quality Metrics Asset Quality Expressed as a % of Total Loans within Category PNFP Peer PNFP 30-90 30-90 NPLs Peer days days and > 90 NPLs past due past due days and > 90 1Q09 ((*)) 1Q09 days (*) () Const. and land dev. 2.33% 2.42% 3.19% 7.16% CRE 0.03% 0.82% 0.46% 1.20% Total real estate 1.26
Slide 11: Asset Quality Metrics: Modified Underwriting Standards
Asset Quality Metrics Modified Underwriting Standards • Requires builders and developers to begin amortization of loan at renewal should project be “off initial plan”. • Vertical construction – 20 yr amortization • Land – 10 yr amortization • Resulted in acceleration of risk rating downgrades in 1Q0
Slide 12: Asset Quality Metrics
Asset Quality Metrics $33.9 MM nonaccruing loans • 0.97% of loan balances Nonaccrual loans $33.9 ORE 19.8 Total NPA’s $53.7 NPA’s as a % of Total loans + ORE 1.54% 1 54% As of March 31, 2009
Slide 13: Asset Quality Metrics: Nonaccruing loans
Asset Quality Metrics Nonaccruing loans • Three largest NPL’s NPL s • #1 - $9.5 mm in loans to builder / developer • #2 - Three development loans to same entity - $4.8 mm • #3 - $4.5 mm to real estate investor • Approximately pp y $5.2 mm in reserves assigned g to NPL’s
Slide 14: Asset Quality Metrics: ORE Classifications
Asset Quality Metrics ORE Classifications ((dollars in thousands)) Average Fair F i value l as Appraisal A i l Balances a % of book Age in March 31, 2009 value Months ORE classifications: New home construct. $ 12,418 111% 6.2 Developed lots 4,689 131% 3.8 Undeveloped land 2,062 166% 2.5 Other 647 10
Slide 15: Asset Quality Metrics: Net Charge-offs
Asset Quality Metrics Net Charge-off’s Charge off s Expressed as a % of Category PNFP Peer Net Net Ch Charge Ch Charge Off’s Off’s (*) Largest 1Q09 charge-offs: 1Q09 - $1.8mm real estate contractor Const. and land dev. 0.60% 2.23% - $0.8mm development loan - $0.5mm mixed use construction CRE - 0.18%
Slide 16: Net Interest Income
Net Interest Income March June Sep Dec March 2008 2008 2008 2008 2009 Loan income $45,392 $42,228 $44,075 $43,433 $38,526 Loan yields 6.61% 5.77% 5.60% 5.27% 4.57% Investment income $5,988 $6,132 $7,345 $9,366 $10,563 Investment yields 5.12% 5.10% 5.24% 5.40% 5.18% Total IB deposit expense $21,086 $
Slide 17: Net Interest Income
Net Interest Income • Margin compression in 1Q09 • Impact of NPA’s - $550,000 • NPA’s NPA s will continue to weigh on margin in 2009 • Anticipated contraction in bond yields going forward • Improving p g margin g trends for 2009 • LIBOR stabilized • Increased use of floors on loans • Variable rate l
Slide 18: Net Interest Income
Net Interest Income • Improving margin trends during 1Q09 • LIBOR stabilized
Slide 19: Net Interest Income
Net Interest Income • Improving margin trends during 1Q09 • Loan rate floors increasing
Slide 20: Net Interest Income
Net Interest Income • Improving margin trends for 2009 • Variable and Floating rate loan repricing opportunities - $312 million of loans maturing and repricing in next six months th Loans - $ Loans – Avg Yield (%) April 2009 $71.2 3.24% May 2009 $64 0 $64.0 3 09% 3.09% June 2009 $53.2 2.88% July 200
Slide 21: Net Interest Income
Net Interest Income • Improving margin trends during 1Q09 • CD repricing opportunities - $875mm in CD’s maturing in six months Brokered Brokered Branch Branch CD’s - $ CD’s – CD’s - $ CD’s – Avg Rate Avg. Rate (%) (%) April 2009 $110.2 2.51% $71.2 2.77% May 2009 $65 0 $65.0 2 63% 2.63% $69 2 $69.2 2
Slide 22: Provision expense
Provision expense March June Sep Dec March 2008 2008 2008 2008 2009 Components of provision: Loan growth $1,216 $1,740 $1,860 $1,642 $ 1,548 Net charge offs 190 870 73 2,068 4,760 Other (*) 185 177 1,192 - 7,302 Total provision expense $1,591 $2,787 $3,125 $3,710 $13,610 Allowance to total loans 1.0
Slide 23: Provision for 2009
Provision for 2009 • Classified assets include one house limit loan • Annualized charge off rate currently anticipated to be in the 50-70 bps range
Slide 24: Fee income
Fee income March June Sep Dec March 2008 2008 2008 2008 2009 Service charges $2,574 $2,684 $2,778 $2,699 $2,477 Investment services 1,268 1,220 1,271 1,164 854 Insurance commissions 1,064 589 959 908 1,305 Gains on loan sales 656 880 1,460 1,048 1,288 Trust fees 505 531 585 557 658 Other: Gain on sa
Slide 25: Fees for 2009
Fees for 2009 • Fee income expected to experience modest increases this year. • Service charges to be flattish • Investment and trust revenues expected to fluctuate with markets. Continue to hire investment brokerage and trust associates. • 1Q09 insurance commissions benefitted by carrier contingenc
Slide 26: Expenses
Expenses March June Sep Dec March 2008 2008 2008 2008 2009 Salaries and benefits $13,867 $12,502 $13,013 $10,014 $14,751 Equipment and occupancy 4,737 3,693 4,235 3,935 4,235 Other real estate owned 61 129 95 1,118 701 Marketing and BD 376 479 381 680 440 Postage 648 843 762 700 830 Intangible amort
Slide 27: Expenses for 2009
Expenses for 2009 • Disproportionate incremental increase in compensation due to reversall off incentives i ti in i 4Q08. 4Q08 FTE’ FTE’s att 736.0 736 0 att March M h 31, 31 compared to 719.0 at year end. Anticipate hiring 40-50 during remainder of 2009. • Incentive accrual at approximately a 60% p
Slide 28: The Health of the Markets
The Health of the Markets March June Sep Dec March 2009 2008 2008 2008 2008 (prelim) Nonfarm Employment: Nashville 765 1 765.1 761 4 761.4 757 7 757.7 747 4 747.4 740 6 740.6 Knoxville 336.0 336.3 334.2 329.6 327.5 Unemployment Rate: Nashville 4.9% 5.8% 6.0% 6.5% 8.4% Knoxville 4.7% 5.6% 5.6% 6.4% 7
Slide 29: The Health of the Markets
The Health of the Markets Nashville residential housing Greater Nashville Association of Realtors
Slide 30: Significant Growth Opportunity Persists
Significant Growth Opportunity Persists K Knoxville ill Original multi- multi-year performance targets 2007 2008 2009 2010 2011 Associate hiring plan Target 26 39 51 59 63 A t l Actual 22 32 39 Facilities Target 2 2 4 5 5 Actual 2 2 2 Loan growth targets Target $ 100 $ 225 $ 375 $ 490 $ 600 (million
Slide 31: 2009 Expectations
2009 Expectations A Loans – Assume continued weakness in 2009 A. • Client selection has been good • Credit quality deterioration likely in 1H09 • Land acquisition and construction book receiving significant attention • NCO’s and NPL’s higher than historical performance B. Capital – Appears sufficien
Slide 32: Final Thoughts
Final Thoughts • Reliable track record for growth • Healthy balance sheet compared to peers • Securities portfolio • Relatively strong loan portfolio • Strong capital base • Healthy markets compared to national trends • Growth opportunity persists
Slide 33: Q&A
Q&A Terry Turner, President and CEO Harold Carpenter, EVP and CFO
Pinnacle Financial Partners — Q1 2009 Earnings Presentation on 6ix