Pinnacle Financial Partners, Inc. · NYSE:PNFP
Pinnacle Financial Partners — Merger or Acquisition (November 2005)
46 slides from Pinnacle Financial Partners's merger presentation, Nov 2, 2005
Slide 1: Pinnacle Financial Partners, November 2005
-innacle FINANCIAL PARTNERS November 2005
Slide 2: Forward looking statements
Forward looking statements Certain of the statements in 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. The words "expect," "anticipate," "inte
Slide 3: Additional information and where to find it
Additional information and where to find It This communication is not a solicitation of a proxy from any security holder of Pinnacle Financial Partners, Inc. or Cavalry Bancorp, Inc. Pinnacle has filed a registration statement on Form S-4 with the Securities and Exchange Commission ("SEC") in connec
Slide 4: Participants in the solicitation
This communication shall not constitute an offer to sell or the solicitation of an offer to buy securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of su
Slide 5: Valuation Summary
Stockholders' equity as of September 30, 2005 $ 62,883,000 Shares outstanding 8,424,000 Book value / share $ 7.46 9/30 10/31 Closing price $25.18 $22.63 Price to tangible BV / share 338% 303% Price to 2005 projected EPS ($0.85 per share*) 30 27 Price to 2006 projected EPS ($1.18 per share*) 21 19 Va
Slide 6: High growth, one-bank holding company
High growth, one-bank holding company Headquartered in Nashville; Tennessee's state capitol 5 years old Total assets at September 30, 2005 - $979 million Market cap at October 31, 2005 - $22.63 per share = $190.3 million Insider ownership - 14% Institutional and mutual fund ownership - 38% Reliable
Slide 7: Reliable Track Record: Deposits, Loans, Assets, Net Income
Total Deposits (EOP) Total Loans (EOP) Total Assets (EOP) Net Income Company Profile Reliable Track Record $730 $604 $979 $2.08
Slide 8: Reliable Track Record: ROA, ROE, Net Interest Margin
Return on Assets Return on Average Equity Net Interest Margin 0.90% 13.23% 3.48% Company Profile Reliable Track Record
Slide 9: Reliable Track Record: Asset Quality
Net Charge Offs Allowance to Total Loans (EOP) Non Accrual Loans to Total Loans Weighted Average Commercial Loan Risk Rating 10 point scale: 1 through 6 = "pass" credits 7 through 10 = criticized / classified (0.03)% 1.20% 0.01% 3.9 Company Profile Reliable Track Record
Slide 10: Asset Growth versus Commitments
2001 2002 2003 2004 2005(*) 2006 2007 2008 2009 2010 Plan 100 200 300 400 500 600 700 800 900 1000 Actual 175 305 498 727 1000 Asset Growth versus Commitments (*) Forecast established in Pinnacle second quarter earnings press release dated July 19, 2005 Targets established in 6/02 prospectus Company
Slide 11: Largest locally-owned financial institution in Nashville
Largest, locally-owned financial institution in Nashville Fastest growing of 185 banks chartered in the US during 2000 Opened 8 branch offices in 5 years Hired 155 experienced associates Retained 96% of associates annually Twice received recognition as the Best Place to Work in Nashville by the Nash
Slide 12: The Nashville Market
The Nashville Market Large, fast growing, metropolitan market Vulnerable Competition Extremely attractive competitive landscape Continued Rapid Growth Leverage existing capacity Continue to add capacity Nashville Knoxville Memphis Growth Opportunity
Slide 13: Current Size and Growth Dynamics
Current Size and Growth Dynamics Size 38th largest MSA 1.3 million population $25 billion deposits Growth 18th fastest growing population 4th fastest growing per capita income Source: U.S. Census, FDIC Large, Fast Growing, Metropolitan Market Growth Opportunity
Slide 14: America's hottest market
America's hottest market (for relocating or expanding) Hottest headquarters MSA for the 21st century Top 10 economic development agency Five star city for logistics Top 10 digital city Least costly city for businesses Top 10 city for African-Americans to live, work and play America's friendliest cit
Slide 15: Large, Fast Growing, Metropolitan Market
Source: SNL Large, Fast Growing, Metropolitan Market Growth Opportunity
Slide 16: County population and income growth
Growth Opportunity Large, Fast Growing, Metropolitan Market County Total Population 2005 (Actual) Projected Population Change 2005-2010 (%) Median HH Income 2005 ($) Projected HH Income Change 2005-2010 (%) Davidson 596,717 6.16 45,854 14.78 Williamson 150,546 17.35 80,324 16.55 Sumner 143,813 9.49
Slide 17: Extremely Attractive Competitive Landscape
Extremely Attractive Competitive Landscape Market Share - Nashville MSA - June 2005 Growth Opportunity Total Deposits Total Deposits Total Share Total Share 2005 Share 2005 Share Rank Institution ($000) ($000) (%) (%) Growth Growth 1 SunTrust Bank $ 4,479,997 $ 4,479,997 17.77% 17.77% (.06) (.06) 2
Slide 18: Significant room to grow market share in Nashville
Significant room to grow market share in Nashville Increase in the number of branch offices Increase in the number of Financial Advisors Urban community bank with significant potential for market extension Growth Opportunity ? 2. Knoxville Growth Strategy to Further Accelerate Asset Growth
Slide 19: A Compelling Strategic Alliance
A Compelling Strategic Alliance High Growth Bank Enters High Growth Sub-Market
Slide 20: Transaction Summary
Fully diluted calculations Based on PNFP closing price on September 30, 2005 of $25.18 per share and October 31, 2005 price of $22.63 per share Fixed exchange ratio 0.95 shares of PNFP for each share of CAVB Anticipated closing First Quarter 2006 - Termination date of March 31, 2006 Consideration 10
Slide 21: Transaction pricing multiples
Price / 2005 annualized earnings (+) 21.2x 19.0x 26.6x (*) Price / book value (++) 302% 271% 311% Price / tangible book value (++) 311% 280% 327% PNFP / CAVB Average of Similar "All Stock" Transactions (#) # Average results based on RJA SNL database consisting of 12 "all stock" merger transactions s
Slide 22: The Transaction Rationale
Acceleration into targeted market Increased size and scale Enhanced franchise value Enhanced geographic market Accretion to earnings Increased float Lower cost source of funding Improved revenue diversification The Transaction Rationale
Slide 23: Important Considerations
"CAVB is not your father's thrift." What is the current earnings capacity of CAVB? How can PNFP extend its dramatic growth? Important Considerations
Slide 24: Loan and Deposit Composition
Loan Composition (6/30/05) Deposit Composition (6/30/05) "CAVB is not your father's thrift" Construction & Consumer Commercial & Industrial 38% 1-4 Family 29% Development 7% Commercial Real Estate 21% 3% Other 2% Other Commercial & Industrial 28% 1-4 Family 25% Construction & Development 24% Commerc
Slide 25: Current earnings capacity of CAVB
1997 1998 1999 2000 2001 2002 2003 2004 2005 Q2 2005E 2005 Q2 Loans 187 266.1 379.9 511.6 605.8 630 8.41 7.69 Net Interest Income 10757 11702 14706 15459 16064 16320 19513 21244 10840 42700 Net Income 2975 2388 2952 8276 4117 4494 5188 2480 8332 6039 Reflects normalized earnings after adjusting for
Slide 26: CAVB Growth Profile
CAVB GROWTH PROFILE 4 Year CAGR Loans 15.8% Deposits 12.3% Assets 11.8% 2004 Growth Rate Loans 22.7% Deposits 11.5% Assets 12.3% How can PNFP extend its dramatic growth? 2005 annualized growth rate Loans 14.2% Deposits 15.1% Assets 12.3% CAVB and Rutherford County provide outsized growth opportunity
Slide 27: Potential Synergies Not Included in Synergy Case
Additional C & I financial advisors to CAVB Treasury Management services to CAVB Insurance services to PNFP Strong commercial focus to CAVB Merchant services to PNFP Various retail pricing initiatives to PNFP Brokerage services to CAVB Residential construction lending to PNFP Important Consideration
Slide 28: Pro Forma Company balance sheet
(As of June 30, 2005 - dollars in thousands) Pinnacle Cavalry Combined (1) Assets: Cash 59,155 $ 83,331 $ 135,279 $ Securities 227,939 29,927 257,865 Loans 562,966 455,805 1,016,468 Allowance for loan losses (6,659) (4,903) (10,669) Intangibles - - 1,896 129,046 Other 28,675 38,600 68,411 Total asse
Slide 29: Merger Execution: Cost savings synergies
Synergy case considers cost savings from both CAVB and PNFP. PNFP's plans for 2006 and 2007 contemplated additional space requirements and hiring of additional support staff. With the CAVB acquisition, PNFP can leverage CAVB's experienced staff and less expensive space to support both PNFP and CAVB'
Slide 30: Merger Execution: Other items
OTHER ITEMS Pretax amounts 2006 Total identified synergies $ 4.6 mm Anticipated intangible amortization $ (2.2) mm Cost of financing merger costs $ (0.5) mm Totals $ 1.9 mm Merger Execution
Slide 31: Merger Execution: One-time costs
Compensation and benefits (1) $10.8 mm Transaction fees and costs $2.5 mm Operations (2) $1.7 mm Administrative and other $1.0 mm Totals $16.0 mm (1) Compensation and benefits are primarily associated with change of control provisions in employment and severance agreements and retirement plans. (2)
Slide 32: Our Plan for the Future
Maintain soundness Harvest robust pipelines Execute a disciplined merger process Continue to capitalize on consolidation related turmoil Continue to invest for future growth People Markets / Offices Infrastructure Remain "well capitalized" Significant trust preferred capacity available Our Plan for
Slide 33: Valuation Summary: High Growth Peer Group Comparisons
Valuation Summary High Growth Peer Group Comparisons Excellent value based on asset and earnings growth profile Company Location Ticker Closing Price on Oct. 31, 2005 Oct 31 Close to Tangible BV FD EPS CAGR for two year period ended Dec. 2006 Oct 31 Close to 2005 Est. EPS (P/E) PE Ratio to Growth (P
Slide 34: Why Pinnacle?
Large, rapidly-growing, metropolitan market Extremely attractive competitive landscape Seasoned management and team of professionals Existing capacity should yield above average growth Continued addition of new markets and people Strong asset quality Recent pull-back in stock price Why Pinnacle?
Slide 35: Appendix
einnacle cavalryBanking Appendix
Slide 36: Increased Size and Scale
Increased Size and Scale Proforma assets of $1.6 billion Proforma market cap of approximately $400 million Largest independent institution headquartered in Nashville Second largest independent institution in the state of Tennessee 17 offices in the most ideal trade areas in Middle Tennessee 6th larg
Slide 37: Enhanced Franchise Value
Enhanced Franchise Value $1.6 billion in assets and 17 offices in advantaged trade areas would attract the largest acquirers and potentially enhance "take-over" premium Elimination of CAVB reduces potential acquisition targets in the Nashville MSA which should increase scarcity value The Transaction
Slide 38: Enhanced Geographic Market
Enhanced Geographic Market Rutherford is the 5th largest county in Tennessee Rutherford is the fastest growing county in Tennessee in terms of population Rutherford has been the fastest growing county in the entire U.S. for the last three quarters in terms of job growth PNFP had plans to enter Murfr
Slide 39: The Transaction Rationale
Source: SNL The Transaction Rationale
Slide 40: Accretion to Earnings
Accretion to Earnings Modest synergy case Anticipated $0.05 impact to 2006 GAAP earnings Experienced management team The Transaction Rationale
Slide 41: Increased Float
Increased Float Proforma shares outstanding would increase from 8.4 million shares to 15.6 million shares Proforma market cap would approximate $400 million The Transaction Rationale
Slide 42: Lower Cost Source of Funding
Lower Cost Source of Funding PNFP CAVB Core deposits / total deposits 69% 84% Q205 average cost of deposits 1.80% 1.63% Q205 total cost of funds 1.97% 1.64% Q205 net interest margin 3.57% 4.18% The Transaction Rationale
Slide 43: Improved Revenue Diversification
Improved Revenue Diversification Percent Total Revenue PNFP CAVB Spread income 88% 64% Deposit charges 3% 17% Investment sales commissions 4% 1% Mortgage (origination and servicing) 2% 4% Insurance sales commissions - 7% Fiduciary fees - 3% Other 3% 4% The Transaction Rationale
Slide 44: CAVB Historical Balance Sheet
CAVB Historical Balance Sheet (Dollars in Thousands) 2001 2002 2003 2004 2Q2004 2Q2005 Balance Sheet Highlights Cash and Securities $113,885 $113,962 $129,028 $108,443 $77,090 $120,544 Gross Loans HFI 284,709 305,181 354,937 435,389 413,983 454,786 Loan Loss Reserves 4,470 4,657 4,525 4,863 4,600 4,
Slide 45: CAVB Historical Income Statement
CAVB Historical Income Statement Note: Ratios exclude non-recurring expenses (Dollars in Thousands) 2001 2002 2003 2004 2Q2004 2Q2005 Income Statement Interest Income $28,108 $23,257 $21,936 $25,068 $5,960 $7,640 Interest Expense 12,649 7,193 5,616 5,555 1,269 2,129 Net Interest Income 15,459 16,064
Slide 46: Pinnacle Financial Partners
-“innacle FINANCIAL PARTNERS
Pinnacle Financial Partners — Merger or Acquisition (November 2005) on 6ix