Pinnacle Financial Partners, Inc. · NYSE:PNFP
Pinnacle Financial Partners — Investor Presentation (September 2010)
38 slides from Pinnacle Financial Partners's investor presentation, Sep 9, 2010
Slide 1: Investor Presentation
Investor Presentation Terry Turner, President and CEO Harold Carpenter, EVP and CFO Harvey White, White Chief Credit Officer September 9, 2010 1
Slide 2: Safe Harbor Statements
Safe Harbor Statements Forward‐looking statements Certain of the statements and information n this presentation 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. T
Slide 3: Opening Comments
Opening Comments • Aggressively dealing with credit issues • Building the core earnings capacity of the firm • Stabilizing St bili i market k t trends t d • Continuing to seize on competitive vulnerabilities 3
Slide 4: Aggressively Dealing with Credit Issues
Aggressively Dealing with Credit Issues 3Q10 Progress • Routine regulatory exam completed • Forecast significant quarter to quarter reduction in NCOs • NPAs should be flat to down • Second quarterly reduction in NPLs • 3Q10 growth in OREO facilitates our ability to accelerate and manage disposition
Slide 5: Asset Quality Metrics – Risk Rating Trends
Asset Quality Metrics – Risk Rating Trends Criticized asset inflows continue downward pace 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 Anticipated
Slide 6: Asset Quality Metrics
Asset Quality Metrics Past Dues > 30 Days March 31, As a % of June 30, As a % of 2010 totall loans l 2010 totall loans l Nonaccrual loans past due $ 111,031 3.19% $ 90,424 2.72% Managed by Special Assets: > 90 days $ 395 0.01% $ 2,752 0.08% 30 to 60 days 47,566 1.36% 14,115 0.42% $ 47,961 , 1.37% $
Slide 7: NPA Disposition Activity
NPA Disposition Activity (dollars in thousands) $80,000 $68,847 $70 $70,000 000 $60,000 $50,000 $50 000 $42,022 $40,000 $33,566 $30 000 $30,000 $26 102 $26,102 $24,026 $20,000 $10 000 $10,000 $6 777 $6,777 $0 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 7
Slide 8: Building Core Earnings Capacity
Building Core Earnings Capacity • Core funding growth at annualized rate of 15.8% during 2Q10 • Anticipate further core funding growth thru 3Q10 • Net N t iinterest t t iincome ffor 3Q anticipated ti i t d tto b be fl flatt with ith 2Q • Net interest margin of 3.23% at 2Q, under pressure in 3Q due t
Slide 9: Positive Trends in Core Funding continue
Positive Trends in Core Funding continue Core Funding Relationship Based Non‐Core Funding Wholesale Funding 100% 16% 12% 10% 90% 22% 23% 24% 80% 24% 26% 70% 26% 31% 28% 24% 60% Anticipate 50% p continued progress p g in 3Q10 40% 30% 62% 66% 59% 47% 49% 51% 20% 10% 0% 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q
Slide 10: Net Interest Margin
Net Interest Margin Key Margin Drivers • Impact from NPLs negatively impact loan yields Net Interest Margin Trend • Greater spreads to index, drive core loan yields up 3.5% 3.45% 3.40% • Higher core funding volumes reduce overall cost of 3.4% 3.35% funds 3.3% • Excess liquidity negatively impacts ma
Slide 11: Taxes and Goodwill
Taxes and Goodwill (dollars in millions) Deferred for DTA Key Points Current Amounts Future Totals A. At June 30, PNFP was in a 3‐ Periods year cumulative l ti loss l Tax related assets $10.9 $44.1 $55.0 position B. Unlikely that PNFP will Tax related liabilities ‐ (24.7) (24.7) record any tax expen
Slide 12: Market Stabilization
Market Stabilization Nashville R id i l Real Residential R l Estate Trends • Several positives in most recent data • Median home prices at 2008 levels • Monthly closings fell in July after several months of year over year increases • Need more jobs to get inventory back to 4‐6 month range 12 Source:
Slide 13: Market Stabilization
Market Stabilization Nashville Relocations FYE June 30, FYE June 30, FYE June 30, 2008 2009 2010 Number of corporate relocations and expansions 51 102 74 New jobs created 3,367 7,396 9,515 Capital investment (in billions) $ 0.2 $ 1.9 $ 3.4 SSquare feet f off space required i d (in (i millions) 3.1 7
Slide 14: Market Stabilization
Market Stabilization Nashville Job Growth • Several Corporate Relocations / Expansions • Nissan – 1,300 jobs ‐ $1.7 billion expansion • Jackson J k N National ti l Life, Lif Omnicell, O i ll Lowes L Hotels H t l • 1,000 jobs through 2012 to 2013 • New Music City Convention center ‐ $600 mm, late 201
Slide 15: Market Stabilization
Market Stabilization Unemployment Information 11.00% 10.00% 9.00% 8.00% Nashville MSA 7.00% Knoxville MSA 6 00% 6.00% US 5.00% 4.00% 15 Source: US Bureau of Labor Statistics “Not seasonally adjusted”
Slide 16: Client Satisfaction Results – 1Q10 and 2Q10
Client Satisfaction Results – 1Q10 and 2Q10 Pinnacle vs. Regional Competitors 30% Regional Regions BankA S Regional SunTrust T t B 25% 20% First Tennessee Regional C Customer Bank of America Regional D Pinnacle Financial Penetration 15% (%) 10% Wells Fargo/ Regional Wachovia F BB&T Regional E 5% Hom
Slide 17: Client Loyalty Results – 1Q10 and 2Q10
Client Loyalty Results – 1Q10 and 2Q10 Pinnacle vs. Regional Competitors Regions RegionalBank A SunTrust Regional B First Tennessee Regional C Pinnacle Bank of America Regional D Q1 & Q2 Q1 & Q2 Q1 & Q2 Q1 & Q2 Q1 & Q2 2009 '10 2009 '10 2009 '10 2009 '10 2009 '10 Base (83) (49) (109) (47) (66) (39)
Slide 18: Final Thoughts
Final Thoughts • Aggressively addressing problem credits • Pursuingg meaningful g NPA resolution • Continued reductions in exposure to C&D • Attractive markets • Market stabilization and recovery • Ability to seize competitive vulnerabilities • Responsibly growing core earnings capacity 18
Slide 19: Supplemental Information
Investor Presentation Supplemental Information Terry Turner, President and CEO Harold Carpenter, EVP and CFO Harvey White, White Chief Credit Officer September 9, 2010 19
Slide 20: Loan Categories
Loan Categories Comparison of 2Q10 to 1Q10, Year End 2009, 2008 *Continued reduction in C&D exposure Amts. %’s Amts. %’s Amts. %’s Amts. %’s 2Q10 2Q10 1Q10 1Q10 4Q09 4Q09 4Q08 4Q08 C&D and Land $ 411.5 12.4% $ 486.3 14.0% $ 525.3 14.7% $ 645.4 19.2% Consumer RE 709.1 21.3% 730.2 21.0% 756.0 21.2% 67
Slide 21: Construction and Land Categories
Construction and Land Categories Comparison of 2Q10 to 1Q10, year end 2009, 2008 * PNFP continues to reduce exposure to residential construction and development Amts. %’s(*) Amts. %’s(*) Amts. %’s(*) Amts. %’s (*) 2Q10 2Q10 1Q10 1Q10 4Q09 4Q09 4Q08 4Q08 Residential – Spec $ 28.1 0.8% $ 39.0 1.1% $ 4
Slide 22: Commercial Real Estate
Commercial Real Estate Vacancy Rates Nashville CRE National CRE Vacancy Rates (*) Vacancy Rates (*) 2Q YE 2009 YE 2008 YE 2007 YE 2006 YE 2005 2010 2Q 2010 Warehouse 9.5% 10.6% 9.6% 8.9% 8.6% 9.1% 11.4% ** Multifamily 8.8% 9.6% 7.6% 5.2% 5.5% 6.2% 7.8% Retail 8.3% 8.1% 6.3% 7.0% 6.3% 6.6% 10.9% Offi
Slide 23: Net Charge-off Trend
Net Charge‐off Trend (dollars in thousands) $50,000 $44,579 $45,000 $40,000 $35,000 $33,463 $30,000 $25,000 $20 000 $20,000 $15,123 $15,000 $10,000 $6,789 $4 760 $4,760 $5 228 $5,228 $5,000 $0 1 1Q09 Q 2Q09 Q 3Q09 Q 4Q09 Q 1Q10 Q 2Q10 Q 23
Slide 24: Net Charge-off's
Net Charge‐off’s • Largest Charge‐off’s during 2Q10 • #1 ‐ $2.6 mm – Finance • #2 ‐ $2.1 mm – Condo development • #3 ‐ $1.8 mm – Retail center • #4 ‐ $1.5 mm – Residential development • #5 ‐ $1.3 mm – Residential development 24
Slide 25: Asset Quality Metrics – June 30, 2010
Asset Quality Metrics – June 30, 2010 Other 1.7% $118 MM nonaccruing loans Resid Const Land Develop 18.4% 35.9% 3.55% of loan balances Nonaccrual loans $118,331,000 ORE 42,616,000 Total NPA’s $160,947,000 C&I 14.4% NPA’s as a % of Total loans + ORE 4.77% CRE 1‐4 Family 21.2% 8.4% As of June 30, 2010
Slide 26: Nonperforming Loans
Nonperforming Loans • Largest NPL’s at June 30, 2010 • #1 ‐ $12.5 $12 5 mm mixed mixed‐use use condo development – foreclosure process has started – approximately 50% sold out • #2 ‐ $9.9 mm retail center – foreclosure in process – several i t interested t d parties ti negotiating ti ti tto purchase
Slide 27: OREO Properties – June 30, 2010
OREO Properties – June 30, 2010 • Largest OREO Properties • #1 ‐ $ $5.0 mm residential development p • #2 ‐ $3.5 mm residential development • #3 ‐ $2.9 mm residential development • #4 ‐ $2.2 mm residential development • #5 ‐ $2.2 mm residential development 27
Slide 28: Conservative Bond Portfolio
Conservative Bond Portfolio Average yield on bond Corporates portfolio = 4.10% 1.3% Average life = 4.96 years Municipals Effective ff i Duration i = 3.23% 3 23% 24.3% MBS pass thrus (millions) MTD QTD 59.3% Agency Purchases $84.2 85.1 Sales (115.7) (115.7) Notes Mat/Calls (8.7) (24.4) 13.1% Pre‐pays
Slide 29: Funding Sources
Funding Sources Positive Trends in Funding Continue Quarter over December 31,, Quarter % Change 30‐Jun‐10 Percent 2009 Percent Core Funding: Noninterest‐bearing deposit accounts 6.4% 529,867 12.5% 498,087 11.3% Interest‐bearing demand accounts 9.1% 527,144 12.4% 483,274 11.0% Savings and money marke
Slide 30: Balance Sheet Strength
Balance Sheet Strength Strong capital base June 30 30, March 31 31, Dec. 31,, Sept. 30, Sept 30 June 30,, 2010 2010 2009 2009 2009 Tangible common equity 7.1% 7.4% 7.3% 7.5% 7.4% Tangible common to risk weighted assets 9.0% 9.1% 8.9% 9.1% 9.0% Tier 1 leverage 10.4% 10.7% 10.7% 10.9% 11.1% Tier 1 ris
Slide 31: Fee Income
Fee Income (dollars in thousands) 2Q10 1Q10 4Q09 3Q09 2Q09 Service charges $2,429 $2,365 $2,595 $2,559 $2,568 Investment services 1,315 1,236 1,136 1,112 1,078 Insurance su a ce co commissions ss o s 904 90 1,099 ,099 895 906 919 9 9 Gains on loan sales 931 566 1,108 900 1,633 Trust fees 755 897 706
Slide 32: Expenses
Expenses (dollars in thousands) 2Q10 1Q10 4Q09 3Q09 2Q09 Salaries and benefits $ $16,191 $ $16,659 $ $15,037 $ $14,245 $ $13,747 Incentive Expense (345) 345 - - (1,072) Equipment and occupancy 5,493 5,366 5,064 4,446 4,310 Other real estate owned 7 411 7,411 5 402 5,402 8 393 8,393 1 250 1,250 3 914
Slide 33: Asset Quality Metrics
Asset Quality Metrics Past Dues and NPLs Expressed as a % of Total Loans within Category PNFP 30-90 30 90 days Peer ee PNFP NPLs s Peer ee past due 30-90 days past and > 90 days NPLs and > 2Q10 due (*) 2Q10 90 days (*) Const. and land 0.89% 1.66% 15.75% 15.38% development CRE – Own Occupied 0.51% 0.
Slide 34: Non-GAAP Financial Measures – Net Interest Margin
Non‐GAAP Financial Measures – Net Interest Margin 2Q10 1Q10 4Q09 3Q09 2Q09 Avg. net earning assets $4,527,471 $4,651,695 $4,690,347 $4,576,473 $4,523,003 Net interest income $35,697 $36,560 $37,031 $34,548 $30,512 Impact of tax exempt instruments 0.07% 0.06% 0.06% 0.06% 0.04% Net interest margin 3.2
Slide 35: Non-GAAP Financial Measures – Efficiency Ratio
Non‐GAAP Financial Measures – Efficiency Ratio 2Q10 1Q10 4Q09 3Q09 2Q09 Total non‐interest expense $ $36,491 $ $36,167 $ $35,448 $ $27,280 $ $30,607 Less: ORE expenses (7,411) (5,402) (8,393) (1,250) (3,914) Non‐Interest expense, excluding ORE $29,080 $30,765 $27,055 $26,030 $26,693 Total Non‐Intere
Slide 36: Extremely Attractive Competitive Landscapes – Nashville
Extremely Attractive Competitive Landscapes Nashville 80% 70.51% 70% 60% Market Sharre 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 37: Extremely Attractive Competitive Landscapes – Knoxville
Extremely Attractive Competitive Landscapes Knoxville 70% 66.62% 65% hare Aggregatte Market Sh 60% 55% 53.51% 50% Aggregate market share for the big 3 in Knoxville MSA has 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 38: Nashville Flood - May 2-3, 2010
Nashville Flood ‐ May 2‐3, 2010 • Nashville Mayor estimated impact at $1.5 billion • Cityy of Nashville – Water Treatment,, Buildings, g , Roads ‐ $250 mm (largely reimbursed by insurance and Federal government) • Corps of Engineers projects • Gaylord Entertainment – Project costs $215 mm to $225 mm
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