Pinnacle Financial Partners, Inc. · NYSE:PNFP
Pinnacle Financial Partners — Q2 2010 Earnings Presentation
36 slides from Pinnacle Financial Partners's earnings presentation, Jul 21, 2010
Slide 1: Second Quarter 2010 Investor Call
Second Quarter 2010 Investor Call Terry Turner, President and CEO Harold Carpenter, EVP and CFO Harvey White, White Chief Credit Officer July 21, 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, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words "expect," "
Slide 3: Opening Comments
Opening Comments Two Important Themes • Focus on aggressively dealing with credit issues • Building the core earnings capacity of the firm 3
Slide 4: Opening Comments: Dealing with Credit Issues
Opening Comments Two Important Themes • Aggressively dealing with credit issues • Construction book down $113 million since year end ’09 • Increased c eased allowance a o a ce to o total o a loans oa s to o 2.61% 6 % • 2nd Qtr NCO’s of $33.5 million • Including restructured loans, total NPA’s increa
Slide 5: Opening Comments: Building Core Earnings Capacity
Opening Comments Two Important Themes • Buildingg the core earnings g capacity p y of the firm • Core funding growth at annualized rate of 15.8% during 2Q10 • 4 new branches since June 30, 2009 and 39 FTE’s in customer contact roles • Net interest income growth of 17.00% over 2Q09 • Net N t interest
Slide 6: Commercial Real Estate
Commercial Real Estate Vacancy Rates Nashville CRE National CRE Vacancy Rates (*) Vacancy Rates (*) 2Q YE YE YE YE YE 2010 2009 2008 2007 2006 2005 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 7: Asset Quality Metrics
Asset Quality Metrics Past Dues and NPLs Expressed as a % of Total Loans within Category PNFP Peer PNFP Peer 30-90 days 30-90 days NPLs and NPLs and past due past due p > 90 days > 90 days y 2Q10 (*) 2Q10 (*) Const. and land 0.89% 2.12% 15.75% 15.35% development CRE – Own Occupied 0 51% 0.51% 0 95%
Slide 8: Asset Quality Metrics
Asset Quality Metrics 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 8
Slide 9: 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 $15,123 $15,000 $10,000 $6,789 $4 760 $4,760 $5,228 $5,000 $0 1 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 9
Slide 10: Asset Quality Metrics: ORE Classifications
Asset Quality Metrics ORE Classifications Balances Fair value as a % Average June 30, 2010 of book value Appraisal Age in (dollars in thousands) (dollars in thousands) Months ORE classifications: New home construct $3,579.2 113.3% 5.3 Developed lots 360.1 106.8% 4.7 Undeveloped land 30 778 6 30,778.
Slide 11: 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 11
Slide 12: 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 13: 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% 50% 40% 30% 62% 66% 59% 47% 49% 51% 20% 10% 0% 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 13
Slide 14: 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 COF 3.4% 3.35% Gap Widening 3.3% 3.19% 3 2% 3.2% 3.25% 3.23% 3.1% 3.19%
Slide 15: Net Interest Income
Net Interest Income • Core Loan yields continue to rise as new and repricing loan opportunities exceed goal of > 5.25% New or New or Renewed Q2 Historical Trend Renewing $$ Rate % April p 2010 $131.8 5.51% May 2010 $130.4 5.53% June 2010 $153.7 5.49% Upcoming Q3 Repricing Maturing/ Opportunities pp
Slide 16: Net Interest Income
Net Interest Income • CD repricing opportunities ‐ $208mm in Client CD’s maturing over next three months. Goal at renewal should be approx. 1.50% to 2.00% for client CD’ss or transfer borrowers to money market accounts. CD Q2 Historical Trend Client CD’s ‐ $ Client CD’s – Avg. Rate (%) April 2010 $1
Slide 17: 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 18: 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 19: Taxes
Taxes (dollars in millions) Deferred for Key points: Current Future Totals Amounts A. At June 30,, PNFP was in a Periods 3‐year cumulative loss Tax related assets $10.9 $44.1 $55.0 position B. Unlikely that PNFP will Tax related liabilities ‐ (24.7) (24.7) record anyy tax expense p or benefit for ne
Slide 20: 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,
Slide 21: Nashville Residential Real Estate Trends
Nashville Residential Real Estate Trends • Several positives in recent data • June ’10 saw big increase in median home prices • Monthly closings continued to rise • Need more jobs to get inventory back to 4‐6 month range Source: GNAR 21
Slide 22: Nashville Job Growth
Nashville Job Growth • Several Corporate Expansions • Nissan – 1,300 , jjobs ‐ $ $1.7 billion expansion p • Jackson National Life, Omnicell, Lowes Hotels • 1,000 1 000 jobs through 2012 to 2013 • New Music City Convention center ‐ $600 mm, late 2012 • Potential Hotel ‐ $200 mm to $300 mm, 700 to 1,0
Slide 23: Final Thoughts
Final Thoughts • Aggressively addressing problem credits • Pursue meaningful g NPA resolution • Continued reductions in exposure to C&D • Attractive markets • Economic stabilization and recovery • Ability to seize competitive vulnerabilities • Responsibly growing core earnings capacity • Continued c
Slide 24: Q&A Second Quarter 2010 Investor Call
Q&A Second Quarter 2010 Investor Call Terry Turner, President and CEO Harold Carpenter, EVP and CFO Harvey White, White Chief Credit Officer July 21, 2010 24
Slide 25: Supplemental Information
S Supplemental l t l IInformation f ti Second Quarter 2010 Investor Call Terry Turner, President and CEO Harold Carpenter, EVP and CFO Harvey White, White Chief Credit Officer July 21, 2010 25
Slide 26: 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 27: 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 28.1 1 0 8% 0.8% $ 39
Slide 28: 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 p • #5 ‐ $1.3 mm – Residential development 28
Slide 29: Nonperforming Loans
Nonperforming Loans • Largest NPL’s • #1 ‐ $12.5 $12 5 mm mixed‐use mixed use condo development – foreclosure process has started – approximately 50% sold out • #2 ‐ $9.9 mm retail center – foreclosure in process – several interested d parties negotiating to purchase h project • #3 ‐ $9.8 mm Nashvil
Slide 30: OREO Properties
OREO Properties • Largest OREO Properties: • #1 ‐ $5.0 $5 0 mm residential development • #2 ‐ $3.5 mm residential development • #3 ‐ $2.9 mm residential development • #4 ‐ $2.2 mm residential development • #5 ‐ $2.2 mm residential development 30
Slide 31: Conservative Bond Portfolio
Conservative Bond Portfolio Average yield on bond Corporates portfolio = 4.10% 1.3% Average life = 4.96 years Municipals p Effective Duration = 3 3.23% 23% 24.3% MBS pass (millions) MTD QTD thrus Purchases $84.2 85.1 Sales (115.7) (115.7) Agency 59.3% Mat/Calls (8.7) (24.4) Notes Pre‐pays (15.2) (30
Slide 32: 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 33: 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 34: 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 35: 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 36: 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
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