Pinnacle Financial Partners, Inc. · NYSE:PNFP
Pinnacle Financial Partners — Q1 2012 Earnings Presentation
60 slides from Pinnacle Financial Partners's earnings presentation, Apr 17, 2012
Slide 1: First Quarter 2012 Investor Call
First Quarter 2012 Investor Call Terry Turner, President and CEO Harold Carpenter, EVP and CFO April 17, 2012
Slide 2: Safe Harbor Statements
Safe Harbor 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 g Act of 1934, as amended. The words “exp
Slide 3: Primary Priorities
Primary Priorities • Build B ild core earnings i capacity i • Aggressively deal with credit issues • Growingg the balance sheet • Repaying TARP 3
Slide 4: First Quarter 2012 Highlights
First Quarter 2012 Highlights Priority: Build the Core Earnings Capacity of the Firm Linked Qtr Quarterly Year Change over Year Change Total loans 1.4% 3.7% C&I and d owner occupied i d CRE lloans 2 5% 2.5% 11 1% 11.1% Noninterest bearing deposits 5.5% 24.4% Net interest income 28.7% 13.6% Net inter
Slide 5: First Quarter 2012 Highlights
First Quarter 2012 Highlights Priority: Aggressively Deal with Credit Issues Linked Q Qtr Year over Consecutive Decrease Year Qtrs. of Decrease Progress Credit losses (NCO’s + ORE expense) (21.1%) (40.9%) 7 NPLs (10.5%) (43.9%) 8 NPAs (12.2%) (41.9%) 7 Classified Loans (9 6%) (9.6%) (30 7%) (30.7%)
Slide 6: Building Core Earnings Capacity
Building Core Earnings Capacity Net Interest Margin Continues Significant Expansion Key Margin Drivers: Net Interest Margin Trend • Higher loan volumes 3.80% 3.74% • Reduced funding costs 3.65% • NPA resolutions 3.70% 3.60% 3.60% 3.55% (in millions) Net Interest Income $39.5 3.50% $40 $39 3 $39.3 3.
Slide 7: Building Core Earnings Capacity
Building Core Earnings Capacity Reduction in Cost of Deposits is Driving Margin Expansion 1.50% 3 3.74% 74% 3.80% 1 43% 1.43% 3.65% 3.70% 3.60% 1.30% 3.55% 3.60% 3 50% 3.50% 3.40% 1.10% 3.40% 3.29% 3.25% 3.30% 3.23% 3.23% 0.90% 3.20% 3.10% 0.70% 3.00% 0.54% 2.90% 0.50% 2.80% 1Q10 2Q10 3Q10 4Q10 1Q11
Slide 8: Building Core Earnings Capacity
Building Core Earnings Capacity Margin Improvement is Built on Success with Clients 4.50% • Continued decline in our 4.00% cost of funds help to drive up customer and overall margins 3.50% • Loan volume growth key to deployment of low‐ 3.00% cost funding resulting in margin expansion 2 50% 2.50% • T
Slide 9: Building Core Earnings Capacity
Building Core Earnings Capacity COF Reduction Opportunities Remain in Maturing CDs • CD repricing opportunities ‐ $148mm in Client CD’s CD s maturing over next three months. Goal at renewal should be below or near average first quarter renewal rate (0.57%). Client CD’s CD s – Avg. Avg Rate Average R
Slide 10: Building Core Earnings Capacity
Building Core Earnings Capacity COF Reduction Opportunities Remain in MMDAs • MMDA pricing opportunities ‐ $228mm in MMDA accounts with current rates above 1.00%. Target rate should approximate 0.40% ‐ 0.60%. Avg Quarterly Quarterly MMDA Rates Reduction 4th Quarter 2010 1.21% 0.15% 1st Quarter 2011
Slide 11: Building Core Earnings Capacity
Building Core Earnings Capacity Adjusted PTPP Expands 28.7% in 1Q12 over the same period prior year (000’s) 1Q12 4Q11 3Q11 2Q11 1Q11 4Q10 Net interest income $39,504 $39,293 $38,356 $37,795 $36,020 $36,056 Total noninterest income 9,949 9,727 10,080 9,809 8,324 8,666 Total revenue 49,453 49,020 48,4
Slide 12: Aggressively Dealing with Credit Issues
Aggressively Dealing with Credit Issues Past Due Loans are Low and Continue to Decline March 31, 31 As a % December 31, 31 As a % 2012 of total 2011 of total (000’s) loans loans Past Due Loans (*) Managed by special assets: Nonaccrual loans $21,443 0.64% $22,339 0.68% Accruing loans 7,599 0.23% 7,43
Slide 13: Aggressively Dealing with Credit Issues
Aggressively Dealing with Credit Issues Credit Losses Continue to Decline $16,000 ORE Expense $14,000 Net Charge-Offs $12,000 $4 334 $4,334 $7,874 $3,826 $10,000 $5,079 $4,193 $8 000 $8,000 $6,000 $4,676 $9,726 $8,605 $4 000 $4,000 $7,146 $6,335 $5,732 $2,000 $3,630 $0 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
Slide 14: Aggressively Dealing with Credit Issues
Aggressively Dealing with Credit Issues Allowance Coverage Increases as NPLs Decline $140,000 $131,381 166.6% 160% $120,000 $118,331 140% ns Total Nonpeerforming Loan $103 127 $103,127 nce to NPL’s $100,000 120% $80,863 000’s) $80,000 $76,368 100% $59,727 Allowan (0 $60,000 $54,640 80% $47,855 68.5%
Slide 15: Aggressively Dealing with Credit Issues
Aggressively Dealing with Credit Issues NPA inflows decrease consistent with NPAs $80 000 $80,000 $160 000 $160,000 $140,471 $70,000 $140,000 NPA Inflowss and Disposittions NPA Acctual Balancees $60,000 $ , $120,000 $ , $50,000 $100,000 ((000’s) $37,251 $38,693 $76,871 $40,000 $33,461 $80,000 $32 25
Slide 16: Aggressively Dealing with Credit Issues
Aggressively Dealing with Credit Issues OREO Valuations Remain Below Actual Results ORE Dispositions (*) thru ORE Balance at March 31, 2012 March 31, 2012 Loan balances p prior to charge g offs 100.0% 100.0% Charge off’s prior to foreclosure 22.3% 21.7% Balance @ foreclosure 77.7% 78.3% Valuation lo
Slide 17: Aggressively Dealing with Credit Issues
Aggressively Dealing with Credit Issues OREO Disposition Plans Suggest Limited Unresolved Issues (dollars in thousands) Balances Near‐term Active Other March 31, liquidation Projects Properties 2012 (1) (2) (3) ORE categories: New home construction/condo’s $ 371 159 212 ‐ Developed lots 6,419 1,310
Slide 18: Looking Forward
Looking Forward • Growing balance sheet volumes • Continuing trends • Expanding capacity • Healthy markets • Expanding the margin • Redeeming the remainder of TARP 18
Slide 19: Growing Balance Sheet Volumes
Growing Balance Sheet Volumes Positive DDA Trends Reflect an Ability to Gain Clients $750 • Avg. account $706 $702 balances of DDAs $700 are $17k per $672 account compared ons) to $17k last 3/31 $650 $ $629 $ ances (in millio $595 • Number of accts up $600 $576 by 17% since March $534 31, 2011. $550
Slide 20: Growing Balance Sheet Volumes
Growing Balance Sheet Volumes Growth Continues in Net Loan Volumes $100 n Growth $50 Net Quaarterly Loan $0 (000’s) ‐$50 ‐$100 $ ‐$150 ‐$200 20
Slide 21: Growing Balance Sheet Volumes
Growing Balance Sheet Volumes NPL disposition impact on net loan growth decreasing $100 $68 $50 $47 nds $0 $ in thousan ‐$55 ‐$50 $(84) ‐$100 ‐$150 ‐$200 $200 Loan Growth (excl. foreclosures and other NPL dispositions) Loan Growth, net 21
Slide 22: Enhancing our Capacity for Growth
Enhancing our Capacity for Growth Existing and New Advisors Have Capacity to Take Share (*) # of Loans Deposits Advisors Current Advisors 109 $900 million $700 million Recent and Projected Hires 11 $375 million $200 million Total 120 $1.275 billion $900 million • Existing advisors should consolidate
Slide 23: Enhancing our Capacity for Growth
Enhancing our Capacity for Growth “Pinnacle ac e Financial a c a Partners a t e s has as recruited ec u ted another a ot e experienced local lender, this one from Bank of America, as part of a big talent push launched last spring. His hiring comes a few weeks after Pinnacle scooped up a former SunTr
Slide 24: Expanding the margin
Expanding the margin Longer Term Potential Margin Expansion Opportunities Exist 1Q 2012 Net N Interest I M i Margin 3 74% 3.74% Opportunities: 1. Loan growth 0.02% to 0.04% 2. Continued reduction in COF 0.03% to 0.05% 3. NPA resolution 0.01% to 0.03% Potential Margin Range 3.80% to 3.86% Notes: 1. E
Slide 25: Healthy Markets
Healthy Markets Nashville’s and Knoxville’s Job Recovery Outpaces the Nation • USA job recovery of jobs lost since peak in early 2008 has amounted to almost 40.5%. 40 5% • Nashville and Knoxville have almost replaced jobs lost 25 Source: BERC – MTSU & Bureau of Labor Statistics
Slide 26: Redeeming the Remainder of TARP
Redeeming the Remainder of TARP Strong Capital Should Eliminate or Limit Common Dilution March 31 31, December 31 31, 2012 2011 • PNFP maintains $41.3 million in cash at the Tangible common equity 8.8% 8.4% bank holding company Tangible common to risk weighted as of year end assets t 10 3% 10.3% 10
Slide 27: Redeeming the Remainder of TARP
Redeeming the Remainder of TARP Strong Capital Should Eliminate or Limit Common Dilution At March 31 Tier 1 Tier 1 Leverage Total Risk Total RBC % Capital $’s % Based‐Capital $’s PNFP capital $533,859 11.68% $590,859 15.45% Less: TARP (71,250) (71,250) Pro Forma capital 462,609 10.12% 519,609 13.55%
Slide 28: Looking Forward
Looking Forward Management’s focus for 2Q12: Against the headwinds • Increasing i llending di opportunities ii • Core fundingg growth g and reduced fundingg costs • Continued expansion of margin and net interest income • Continued improvement in asset quality metrics 28
Slide 29: Q&A – First Quarter 2012 Investor Call
Q&A – First Quarter 2012 Investor Call Terry Turner, President and CEO Harold Carpenter, EVP and CFO April 17, 2012 29
Slide 30: Supplemental Information
Supplemental Information First Quarter 2012 Investor Call Terry Turner, President and CEO Harold Carpenter, EVP and CFO April 17, 2012 30
Slide 31: Supplemental Information
Supplemental Information Chart • Asset Quality 32 • Balance Sheet 46 • Income Statement 50 • Economic Conditions 55 31
Slide 32: Asset Quality
Supplemental Information Asset Quality 32
Slide 33: Loan Categories
Loan Categories Comparison of 1Q12 to 4Q11, 1Q11 and 1Q10 Amts. %’s Amts. %’s Amts. %’s Amts. %’s 1Q12 1Q12 4Q11 4Q11 1Q11 1Q11 1Q10 1Q10 C&D and Land $281.6 8.4% $274.2 8.3% $300.7 9.3% $486.3 14.0% Consumer RE 688.8 20.6% 695.8 21.1% 698.7 21.7% 730.2 21.0% CRE – Owner Occ. 590.4 17.7% 582.0 17.7%
Slide 34: Construction and Land Categories
Construction and Land Categories Comparison of 1Q12 to 4Q11, 1Q11 and 1Q10 Amts. %’s(*) Amts. %’s(*) Amts. %’s(*) Amts. %’s(*) 1Q12 1Q12 4Q11 4Q11 1Q11 1Q11 1Q10 1Q10 Residential – Spec $ 13 13.5 5 0 4% 0.4% $ 12 12.4 4 0 4% 0.4% $ 17 17.0 0 0 5% 0.5% $ 39 39.0 0 1 1% 1.1% Residential – Custom 9.7 0
Slide 35: Construction and Land Categories
Construction and Land Categories • At March 31, 2012 almost 22.4% of C&D book managed by Special Asset Group personnel, compared to 40.0% at March 31, 2011. • Almost 36.5% and 44.8% at March 31, 2012 and 2011, respectively, of land categories managed by SAG. Total Total Total NPLs NPLs NPLs Performi
Slide 36: Construction and Land Categories
Construction and Land Categories Analysis of Pass‐rated AC&D loans • Pass rated credits have minimal past dues. Avg. ticket size of about $445,000. Pass Pass Pass Past due Past due Past due Pass to Pass to Pass to rated rated rated 1Q12 4Q11 1Q11 Fail Fail Fail 1Q12 4Q11 1Q11 During During During 1Q
Slide 37: Potential Problem Loans Continue to Decline
Aggressively Dealing with Credit Issues Potential Problem Loans Continue to Decline 10.0% oans 9.30% oans/Total lo 9 0% 9.0% 8 63% 8.63% 8.23% 8.0% 7.24% 7.18% 6.95% 7.0% 6 0% 6.0% al Problem lo 5.31% 5.0% 4.30% 4.62% 4.04% 3.96% 3.78% 4.0% 3 0% 3.0% Potentia 2.0% 1.0% 0 0% 0.0% Note: Classified loa
Slide 38: Classified Assets Decrease in 1Q12
Aggressively Dealing with Credit Issues Classified Assets Decrease in 1Q12 Balances Balances Balances Balances March 31, 2012 Dec. 31, 2011 March 31, 2011 March 31, 2009 (dollars (dollars (dollars (dollars in thousands) in thousands) in thousands) in thousands) Cl ifi d lloans and Classified d ORE:
Slide 39: Nonperforming Loan Trends
Nonperforming Loan Trends NPLs Continue to Decline Ahead of Peers NPLs Expressed as a % of Total Loans within Category Peer PNFP PNFP PNFP NPLs and NPLs and NPLs and NPLs and > 90 days > 90 days > 90 days > 90 days (*) 1Q12 4Q11 1Q2011 4Q11 Const. and land development 2.48% 4.73% 12.30% 8.42% CRE –
Slide 40: Nonperforming Loans
Nonperforming Loans • Largest NPLs • #1 ‐ $3.8 million owner occupied p commercial real estate • #2 ‐ $3.4 million consumer real estate • #3 ‐ $2.9 million commercial land development • #4 ‐ $2.2 million consumer real estate • #5 ‐ $1.7 $1 7 million C&I • Top five represent 32.9% of NPL balances at
Slide 41: ORE is 44.3% of NPAs with Resolution in Bank's Control
Aggressively Dealing with Credit Issues ORE is 44.3% of NPAs with Resolution in Bank’s Control Balances Fair value as a % Average March 31, 2012 of book value* Appraisal Age in (dollars in thousands) Months ORE categories: New home construction/condo’s $ 371 140.1% 6.98 Developed lots 6,419 138.2% 4
Slide 42: Foreclosure pace slowing significantly
Aggressively dealing with credit issues Foreclosure pace slowing significantly $30,000 $24,133 $25,000 0’s) $20,000 Foreeclosures (000 $15,000 $10,000 $5,000 $4,575 $ , $‐ 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 ¾ Q2 2012 foreclosures f l estimated d at $ $6.0M 42
Slide 43: OREO Properties
OREO Properties • Largest OREO Properties: • #1 ‐ $3.9 $ million mixed‐use development • #2 ‐ $3.2 million residential development • #3 ‐ $2.2 million residential development • #4 ‐ $1.8 million residential development • #5 ‐ $1.8 million residential developments • These balances make up 38% of the
Slide 44: Land Loan and Land-related ORE locations
Land Loan and Land‐related ORE locations 4.4% 9.4% Middle TN East TN Other 86.2% > $250,000 properties, approx. $177.9 mm balances 44
Slide 45: Net Charge-off's
Net Charge‐off’s • Largest Charge‐offs During 1Q12 • #1 ‐ $0.9 million construction & land development • #2 ‐ $0.5 million C&I • #3 ‐ $0.3 million commercial real estate • #4 ‐ $ $0.3 million C&I • #5 ‐ $0.3 million C&I • These credits make up 62% of net charge offs for 1Q12 45
Slide 46: Balance Sheet
Supplemental Information Balance Sheet 46
Slide 47: Funding is Almost Exclusively Relationship Based
Building Core Earnings Capacity Funding is Almost Exclusively Relationship Based 3/31/2012 Percent 12/31/2011 Percent Core Funding: Non‐interest bearing deposit accounts 756,909 18.70% 717,379 17.46% Interest‐bearing deposit accounts 694,755 17.17% 637,203 15.51% Money Market accounts 1,497,843 37.0
Slide 48: Investment Portfolio
Investment Portfolio Conservative bond portfolio Average yield on bond Treasuries Corporates portfolio = 3.30% (TEY) 0.0% 1.3% Agency Average life = 4.34 years Notes Municipals Effective Duration = 2.70% 2 70% 2 5% 2.5% 23.2% ( ll (millions) ) MTD QTD MBS pass Purchases $ 15.0 $ 18.0 thrus Sales ($
Slide 49: Investment Portfolio
Investment Portfolio Municipal portfolio Municipal Bond Portfolio Statistics 1Q12 1Q11 Weighted Average Life 5.9 years 7.7 years All municipals are “A” rated or better. % State Agency Holdings 4.80% 5.80% Tax equivalent yield 4.90% 4.89% FMV as % of Cost 107.10% 102.30% As of March 31, 2012 Location
Slide 50: Income Statement
Supplemental Information Income Statement 50
Slide 51: Noninterest Income
Building Core Earnings Capacity Noninterest Income 1Q12 4Q11 3Q11 2Q11 1Q11 Service charges $ 2,324 $ 2,291 $ 2,362 $ 2,330 $ 2,261 Investment services 1,581 1,402 1,699 1,637 1,508 Insurance commissions 1 288 1,288 944 1 002 1,002 1 004 1,004 1 049 1,049 Net gains on mortgage loan sales 1,494 1,461
Slide 52: First quarter expenses in line with expectations
Building Core Earnings Capacity First quarter expenses in line with expectations 1Q12 4Q11 3Q11 2Q11 1Q11 Salaries and benefits $17,762 $16,230 $15,951 $15,870 $16,985 Incentive expense 2,031 2,733 3,065 2,654 938 Equipment and occupancy 4,374 4,977 4,943 5,060 5,007 Other real estate owned 4,676 4,
Slide 53: Non-GAAP Financial Measures – Net Interest Margin
Non‐GAAP Financial Measures – Net Interest Margin 1Q12 4Q11 3Q11 2Q11 1Q11 Avg net earning assets Avg. $4 316 973 $4,316,973 $4 347 352 $4,347,352 $4 308 710 $4,308,710 $4 347 552 $4,347,552 $4 387 331 $4,387,331 Net interest income $39,504 $39,293 $38,356 $37,795 $36,020 Impact of tax exempt 0.06%
Slide 54: Non-GAAP Financial Measures – Efficiency Ratio
Non‐GAAP Financial Measures – Efficiency Ratio 1Q12 4Q11 3Q11 2Q11 1Q11 Net interest income $39,504 $39,293 $38,356 $37,795 $36,020 Total non‐interest income $9,949 $9,727 $10,080 $9,809 $8,324 Less: Securities (gains) losses (113) (133) (377) (610) 159 Non‐interest income, excluding securities $9,8
Slide 55: Economic Conditions
Supplemental Information Economic Conditions 55
Slide 56: Unemployment Trends
Unemployment Trends • Both Nashville and Knoxville continue to outperform at 6.8% 6 8% and 6.2%, respectively. • State of Tennessee unemployment approximates USA unemployment 56 Source: BERC – Middle Tennessee State University & Bureau of Labor Statistics
Slide 57: Nashville Residential Real Estate Market
Nashville Residential Real Estate Market Nashville’s Real Estate Market Continues to Improve 1Q Q 2012 1Q Q 2011 % Change g Avg. Qtrly. Median Home $161,967 $166,800 (2.9%) Price Quarterly 3,959 3,283 20.6% Closings Quarter end 11 787 11,787 13 465 13,465 (12 5%) (12.5%) Inventory Months of 7.4 9.5
Slide 58: Residential Real Estate Trends
Residential Real Estate Trends • Zillow.com Home Value Index (i.e., “Zestimate”) trends 1/2000 thru 2/2012 ffor single i l ffamily il homes • Chart compares volatilityy in home prices in Nashville and Knoxville to select other US markets • As we have mentioned numerous times, similar to many other s
Slide 59: Commercial Real Estate
Commercial Real Estate Vacancy Rates Nashville CRE National CRE Vacancy Rates Vacancy Rates Q1 YE 2011 (*) YE 2010 (*) YE 2009 YE 2008 YE 2007 Q1 2012(*) (**) (**) (**) 2012 (*) Industrial / 10.0% 10.1% 10.2% 10.6% 9.6% 8.9% 9.4% Warehouse Multifamily 7 2(***) 7.2(***) 6 6% 6.6% 6 7% 6.7% 9 6% 9.6%
Slide 60: First Quarter 2012 Investor Call
First Quarter 2012 Investor Call Terry Turner, President and CEO Harold Carpenter, EVP and CFO April 17, 2012
Pinnacle Financial Partners — Q1 2012 Earnings Presentation on 6ix