Pinnacle Financial Partners, Inc. · NYSE:PNFP
Pinnacle Financial Partners — Q1 2010 Earnings Presentation
29 slides from Pinnacle Financial Partners's earnings presentation, Apr 20, 2010
Slide 1: First Quarter 2010 Investor Call
First Quarter 2010 Investor Call Terry Turner, President and CEO Harold Carpenter, EVP and CFO Harvey White, Chief Credit Officer April 20, 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: Two Important Themes
Opening Comments Two Important Themes • Focus on aggressively dealing with credit issues • Building the core earnings capacity of the firm
Slide 4: Opening Comments: Aggressively dealing with credit issues
Opening Comments Two Important Themes • Aggressively dealing with credit issues • Construction book down $38 million since year end ’09 • Increased allowance to total loans to 2.59% • 1st Qtr annualized NCO’s of 1.74% • Including restructured loans, total NPA’s decreased from 5.05% to 4.74% between
Slide 5: Opening Comments: Building core earnings capacity
Opening Comments Two Important Themes • Building the core earnings capacity of the firm • Core funding growth at annualized rate of 14.01% • 4 new branches since March 31, 2009 and 33 FTE’s in customer contact roles • Net interest income growth of 27.39% over 1Q09 • Net interest margin of 3.25% comp
Slide 6: Loan Categories
Loan Categories Comparison of 1Q10 to year end 2009, 2008 *Continued reduction in C&D exposure Amts. %’s Amts. %’s Amts. %’s 1Q10 1Q10 4Q09 4Q09 4Q08 4Q08 C&D and Land $ 486.3 14.0% $ 525.3 14.7% $ 645.4 19.2% Consumer RE 730.2 21.0% 756.0 21.2% 675.6 20.1% CRE – Owner Occ. 545.6 15.7% 535.1 15.0% 3
Slide 7: Commercial Real Estate
Commercial Real Estate Vacancy Rates Nashville CRE National CRE Vacancy Rates (*) Vacancy Rates (*) YE 2009 YE 2008 YE 2007 YE 2006 YE 2005 YE 2009 Warehouse 10.6% 9.6% 8.9% 8.6% 9.1% 11.4% Multifamily 9.6% 7.6% 5.2% 5.5% 6.2% 8.0% Retail 8.1% 6.3% 7.0% 6.3% 6.6% 10.6% Office 12.7% 10.5% 10.5% 11.1%
Slide 8: Asset Quality Metrics
Asset Quality Metrics Past Dues and NPLs Expressed as a % of Total Loans within Category PNFP PNFP PNFP Peer PNFP PNFP PNFP Peer 30-90 30-90 30-90 30-90 NPLs NPLs NPLs NPLs days days days days and > 90 and > 90 and > 90 and > 90 past due past due past due past due days days days days (*) 1Q10 4Q09 3
Slide 9: Asset Quality Metrics
Asset Quality Metrics Other 0.6% Land $131.4 MM nonaccruing loans Resid Const Develop 3.78% of loan balances 21.8% 33.5% Nonaccrual loans $131.4 ORE 24.7 Total NPA’s $156.1 NPA’s as a % of Total loans + ORE 4.45% C&I As of March 31, 2010 14.2% CRE 1-4 Family 20.2% 9.7%
Slide 10: Asset Quality Metrics: Nonperforming loans
Asset Quality Metrics Nonperforming loans • Largest NPL’s • #1 - $11.7 mm retail shopping complex – current action plan is to receive approximately $4 mm in resolution in 2Q and 3Q • #2 - $10.9 mm condo developer – Experienced $5+ million in pay downs in last year • #3 - $8.6 mm residential develope
Slide 11: Asset Quality Metrics: ORE Classifications
Asset Quality Metrics ORE Classifications Balances Fair value as a % Average March 31, 2010 of book value Appraisal Age in (dollars in thousands) (dollars in thousands) Months ORE classifications: New home construct $2,752 137% 5.69 Developed lots 1,244 109% 4.06 Undeveloped land 18,263 111% 3.60 Ot
Slide 12: Asset Quality Metrics: Net Charge-offs
Asset Quality Metrics Net Charge-off’s • Largest Charge-off’s during 1Q10 • #1 - $1.69 mm – Developer • #2 - $1.64 mm – Residential development • #3 - $1.50 mm – Real Estate related bankruptcy • #4 - $819,000 – C&I credit • #5 - $786,000 – Commercial development
Slide 13: Balance Sheet Strength
Balance Sheet Strength Strong capital base March 31, Dec. 31, Sept. 30, June 30, March 31, 2010 2009 2009 2009 2009 Tangible common equity 7.4% 7.3% 7.5% 7.4% 6.0% Tangible common to risk weighted assets 9.1% 8.9% 9.1% 9.0% 7.4% Tier 1 leverage 10.7% 10.7% 10.9% 11.1% 9.7% Tier 1 risk based capital
Slide 14: Funding sources
Funding sources Positive trends in funding continue Quarter over quarter % Balances at % of Total at Balances at % of Total at change March 31, 2010 March 31, 2010 Dec. 31, 2009 Dec. 31, 2009 Core Funding: Noninterest-bearing deposit accounts 5.0% 522,928 12.2% 498,087 11.3% Interest-bearing demand
Slide 15: Net Interest Income
Net Interest Income 1Q10 4Q09 3Q09 2Q09 1Q09 Loan income $41,075 $42,453 $41,666 $39,627 $38,526 Loan yields 4.74% 4.71% 4.61% 4.52% 4.57% Investment income $11,138 $10,766 $10,302 $9,967 $10,563 Investment yields 4.63% 4.57% 4.67% 4.60% 5.18% Total IB deposit expense $13,464 $13,875 $15,100 $16,420
Slide 16: Net Interest Income
Net Interest Income • Margin expansion continues in 1Q10 • Core funding continues to replace non-core funding sources - extending lower funding costs • Impact of NPA’s • NPA’s impact margin in Q1 and will continue in 2010 • Improving margin trends for 2010 • Variable rate loan pricing opportunities
Slide 17: Net Interest Income: Loan repricing
Net Interest Income • Loan repricing opportunities - $525 million of loans maturing and repricing in next six months at current rate of < 5.25%. • Goal at renewal should be > 5.25% rate. Loans - $ Loans – Avg Yield (%) April 2010 $80.6 4.22% May 2010 $82.4 3.94% June 2010 $102.5 4.54% July 2010 $91.
Slide 18: Net Interest Income: CD repricing
Net Interest Income • CD repricing opportunities - $467mm in Client CD’s maturing over next six months. Goal at renewal should be approx. 1.00% to 1.75% for client CD’s or transfer borrowers to money market accounts. Client CD’s - $ Client CD’s – Avg. Rate (%) April 2010 $99.6 2.69% May 2010 $91.6 2
Slide 19: Net Interest Income
Net Interest Income • Continued rise in Core Funding has fueled a decline in Cost of Funds • Core funding is expected to continue to replace maturing non-core funding sources
Slide 20: Final Thoughts
Final Thoughts • Aggressively addressing problem credits • Modest reserve building may continue in 2010 • Pursue meaningful NPA resolution • Continued reductions in exposure to C&D • Attractive markets • Economic stabilization and recovery • Ability to seize competitive vulnerabilities • Responsibly
Slide 21: Q&A First Quarter 2010 Investor Call
Q&A First Quarter 2010 Investor Call Terry Turner, President and CEO Harold Carpenter, EVP and CFO Harvey White, Chief Credit Officer April 20, 2010
Slide 22: Supplemental Information
Supplemental Information First Quarter 2010 Investor Call Terry Turner, President and CEO Harold Carpenter, EVP and CFO Harvey White, Chief Credit Officer April 20, 2010
Slide 23: Construction and Land Categories
Construction and Land Categories Comparison of 1Q10 to year end 2009, 2008 * PNFP continues to reduce exposure to residential construction and development Amts. %’s(*) Amts. %’s(*) Amts. %’s (*) 1Q10 4Q09 4Q08 1Q10 4Q09 4Q08 Resid – Spec $ 39.0 1.1% $ 44.2 1.2% $ 96.9 2.9% Resid - Custom 18.8 0.5% 1
Slide 24: Balance Sheet Strength: Conservative bond portfolio
Balance Sheet Strength Conservative bond portfolio Average yield on bond Corporates portfolio = 4.74% 1.1% Municipals Average life = 4.19 years 22.0% As of March 31, 2010 Agency Notes 13.9% Agency MBS pass CMOs thrus 0.7% 62.3% FNMA, FHLMC and GNMA
Slide 25: Fee income
Fee income 1Q10 4Q09 3Q09 2Q09 1Q09 Service charges $2,365 $2,595 $2,559 $2,568 $2,477 Investment services 1,236 1,136 1,112 1,078 854 Insurance commissions 1,099 895 906 919 1,305 Gains on loan sales 566 1,108 900 1,633 1,288 Trust fees 897 706 586 642 658 Other: Gain on sales of 365 - - 2,116 4,34
Slide 26: Expenses
Expenses 1Q10 4Q09 3Q09 2Q09 1Q09 Salaries and benefits $16,659 $15,037 $14,245 $13,747 $13,679 Incentive Expense 345 - - (1,072) 1,072 Equipment and occupancy 5,366 5,064 4,446 4,310 4,235 Other real estate owned 5,402 8,393 1,250 3,914 701 Marketing and BD 754 1,116 512 466 440 Postage 734 755 515
Slide 27: Expenses for 2010
Expenses for 2010 • Personnel Costs increase in Q1 • FTE’s at 786 at March 31, compared to 777 at Dec ’09. • 4 hires related to problem loan resolution in Q1 • Seasonal salary and payroll tax increases • Anticipate 15-20 additional hires in 2010. • Occupancy and equipment costs are higher due to new
Slide 28: Aggregate Market Share: Nashville
Extremely Attractive Competitive Landscapes Nashville 80% 70.51% 70% Aggregate Market Share 60% 50% 44.06% 40% 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 Nas
Slide 29: Aggregate Market Share: Knoxville
Extremely Attractive Competitive Landscapes Knoxville 70% 66.62% 65% Aggregate Market Share 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 Knoxvil
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