Pinnacle Financial Partners, Inc. · NYSE:PNFP
Pinnacle Financial Partners — Raymond James Bank Conference (August 2012)
56 slides from Pinnacle Financial Partners's conference presentation, Aug 14, 2012
Slide 1: Raymond James Bank Conference
Raymond James Bank Conference Terry Turner, President and CEO Harold Carpenter, EVP and CFO Chicago – August 14, 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 Act of 1934, as amended. The words “expec
Slide 3: Primary Priorities
Primary Priorities Pinnacle has consistently executed against its priorities 2010-2012 • Aggressively deal with credit issues • Build core earnings capacity 2012 • Growing the balance sheet 3
Slide 4: Second Quarter 2012 Highlights
Second Quarter 2012 Highlights Asset quality continued to improve Linked Qtr Year over Consecutive Change Year Change Qtrs. of Progress Credit losses (NCO’s + ORE expense) (33.7%) (55.7%) 8 NPLs (4.7%) (31.7%) 9 NPAs (13.8%) (40.9%) 8 Classified loans (2.6%) (20.2%) 8 Potential problem loans (5.6%)
Slide 5: Second Quarter 2012 Highlights
Second Quarter 2012 Highlights Core earnings capacity continued to expand Linked Qtr Quarterly Year Change over Year Change Total loans 3.2% 7.4% C&I and owner occupied CRE loans 3.3% 14.3% Avg. Noninterest bearing deposits 7.7% 20.1% Net interest income 1.7% 6.3% Net interest margin 0.5% 5.9% Nonin
Slide 6: Building Core Earnings Capacity
Building Core Earnings Capacity Net interest income and margin continued to expand Key Revenue Drivers: Net Interest Margin Trend • Higher loan volumes 3.76% 3.80% • Reduced funding costs 3.74% • NPA resolutions 3.70% 3.65% 3.60% 3.60% 3.55% (in millions) Net Interest Income 3.50% $42 $40.2 3.40% 3.
Slide 7: Building Core Earnings Capacity: Cost of deposits and margin
Building Core Earnings Capacity Reduction in cost of deposits drove margin expansion 1.45% 3.74% 3.76% 3.80% 1.36% 3.65% 3.60% 1.25% 3.55% 3.60% Net Interest Margin (%) Cost of Funds 3.40% 1.05% 3.40% 3.29% 3.23% 3.23% 0.85% 3.20% 0.65% 3.00% 0.47% 0.45% 2.80% 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
Slide 8: DDA Average Balances
Building Core Earnings Capacity Historical DDA trends reflect an ability to gain clients $800 • Year-over-year DDA $756 account balances up $750 21.3%. DDA Average Balances (in millions) $706 $702 $700 $672 • Year-over-year $650 $629 number of accounts $595 up 18.7%. $600 $576 $550 $534 $504 $500 $4
Slide 9: Net Quarterly Loan Growth
Building Core Earnings Capacity Quarterly net loan growth is expanding $150 Net Quarterly Loan Growth (000’s) $100 $50 $0 -$50 -$100 -$150 -$200 9
Slide 10: Building Core Earnings Capacity: Credit losses decline
Building Core Earnings Capacity Credit losses continue to decline $16,000 ORE Expense $14,000 Net Charge-Offs $12,000 $4,334 $3,826 $10,000 $5,079 $4,193 $8,000 $6,000 $4,676 $9,726 $8,605 $4,000 $3,104 $6,335 $5,732 $2,000 $3,630 $2,399 $0 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 10
Slide 11: Adjusted PTPP expands 16.5%
Building Core Earnings Capacity Adjusted PTPP expands 16.5% in 2Q12 over the same period prior year (000’s) 2Q12 1Q12 4Q11 3Q11 2Q11 1Q11 Net interest income $40,185 $39,504 $39,293 $38,356 $37,795 $36,020 Total noninterest income 9,910 9,949 9,727 10,080 9,809 8,324 Total revenue 50,095 49,453 49,0
Slide 12: Outlook for the Future
Outlook for the Future Beginning the next phase – growth and discipline 12
Slide 13: Company Profile – Phase 1 (2000-2008)
Company Profile – Phase 1 (2000-2008) PNFP successfully moved quality share from large regionals Loans & Deposits MBI Merger $4,000 $3,500 Cavalry Merger $3,000 $2,500 $2,000 Total Deposits (EOP) $1,500 Total Loans (EOP) $1,000 $500 $0 Net Charge-off’s 0.30% 0.25% 0.20% Net Charge Offs 0.15% 0.10% A
Slide 14: Company Profile – Phase 1 (2000-2008)
Company Profile – Phase 1 (2000-2008) Acquisitions significantly altered loan mix toward C&D 70% 59.7% 59.6% 54.8% 60% Commercial Mortgage 50% and C&I Construction and 40% Development 30% 21.2% 16.9% 20% 10.4% 10% 0% 2005 2006 2007 14
Slide 15: Company Profile – Phase 2 (2008 – 2012)
Company Profile – Phase 2 (2008 – 2012) Pinnacle’s loan portfolio outperformed during the recession Nonperforming Assets + 90 days delinquent Net Charge-offs to Total Loans as a percentage of loans and ORE 2008-Q1 2012 9.00 14.00 12.48% 12.59% 8.00 12.00 11.19% 7.00 10.00 9.26% 6.00 8.00 5.00 6.00 4
Slide 16: Company Profile – Phase 3 (2012 and Beyond)
Company Profile – Phase 3 (2012 and Beyond) Pinnacle is progressing toward its long-term profitability targets Ratio PNFP PNFP PNFP PNFP FY2011 1Q12 2Q12 Long-term Targets ROAA 1.12%* 1.00%* 0.90%* 1.10%-1.30% NIM 3.55% 3.74% 3.76% 3.70%-3.90% Net Charge-offs 0.69% 0.45% 0.28% 0.20%-0.35% Noninteres
Slide 17: Achieving Long-term Targets: Job recovery
Achieving Long-term Targets Nashville’s and Knoxville’s job recovery outpaces the nation • USA recovery of jobs lost since peak employment in 2008 has amounted to 43.9% • Nashville has replaced 86% while Knoxville has replaced 100% Source: BERC – MTSU & Bureau of Labor Statistics 17
Slide 18: Achieving Long-term Targets: Market leadership
Achieving Long-term Targets Pinnacle has established a market leadership position Customers as a % of the Lead Relationships as a % of Total Market the Total Market 24% 19% Pinnacle Financial 17% 12% 22% 14% Regional A Q2 2011-Q1 2012 27% 19% Q2 2010-Q1 2011 22% 12% Regional B 23% 15% 10% 6% Regiona
Slide 19: Achieving Long-Term Targets
Achieving Long-Term Targets Recent hires and existing advisors have incremental capacity to take share 2012 - 2014 Anticipated Net Loan Growth YTD 2012 $153 Million YTD Previously Reported Growth Current Quarter Growth FA Capacity $1.27 Billion Capacity $1.27 Billion Target 19
Slide 20: Achieving Long-Term Targets
Achieving Long-Term Targets Pinnacle is currently positioned for achieving targets • Strong, healthy markets • Current and historical performance trends • Track record and reputation for taking share • Existing expenses support meaningful asset growth 20
Slide 21: Looking to the Near-Term
Looking to the Near-Term Management’s focus for 3Q12 • Continued improvement in asset quality metrics • Increasing lending opportunities • Core funding growth and reduced funding costs • Continued expansion of net interest income 21
Slide 22: Q&A Raymond James Bank Conference
Q&A Raymond James Bank Conference Terry Turner, President and CEO Harold Carpenter, EVP and CFO Chicago – August 14, 2012
Slide 23: Supplemental Information
Supplemental Information Raymond James Bank Conference Terry Turner, President and CEO Harold Carpenter, EVP and CFO Chicago – August 14, 2012 23
Slide 24: Supplemental Information Contents
Supplemental Information Chart • Asset Quality 25 • Balance Sheet 35 • Income Statement 46 • Economic Conditions 52 24
Slide 25: Supplemental Information: Asset Quality
Supplemental Information Asset Quality 25
Slide 26: Potential problem loans continue to decline
Aggressively Dealing with Credit Issues Potential problem loans continue to decline 10.0% Potential Problem loans/Total loans 9.30% 9.0% 8.63% 8.23% 8.0% 7.24% 7.18% 6.95% 7.0% 6.0% 5.31% 5.0% 4.30% 4.62% 4.04% 3.96% 3.78% 4.0% 3.21% 3.0% 2.0% 1.0% 0.0% Note: Classified loans (or loans with a credit
Slide 27: Classified assets decrease in 2Q12
Aggressively Dealing with Credit Issues Classified assets decrease in 2Q12 Balances Balances Balances Balances June 30, 2012 Dec. 31, 2011 June 30, 2011 June 30, 2010 (dollars (dollars (dollars (dollars in thousands) in thousands) in thousands) in thousands) Classified loans and ORE: - Substandard c
Slide 28: 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 (*) 2Q12 1Q12 4Q11 1Q12 Const. and land development 2.09% 2.48% 4.73% 11.11% CRE – Ow
Slide 29: ORE is 38.4% of NPAs
Aggressively Dealing with Credit Issues ORE is 38.4% of NPAs with resolution in bank’s control Balances Fair value as a % Average June 30, 2012 of book value* Appraisal Age in (dollars in thousands) Months ORE categories: New home construction/condo’s $ 3 100.0% 5.08 Developed lots 4,136 207.8% 4.09
Slide 30: Allowance coverage increases as NPLs decline
Aggressively Dealing with Credit Issues Allowance coverage increases as NPLs decline 170.53% $140,000 160% $118,331 $120,000 Total Nonperforming Loans 140% Allowance to NPL’s $103,127 $100,000 120% $80,863 $80,000 $76,368 100% (000’s) $54,640 80% $60,000 $59,727 $47,855 73.60% $42,852 60% $40,821 $4
Slide 31: NPA Inflows and Dispositions
Aggressively Dealing with Credit Issues NPA inflows decrease consistent with NPAs $80,000 $160,000 $70,000 $132,368 $140,000 NPA Inflows and Dispositions NPA Actual Balances $60,000 $120,000 $50,000 $100,000 (000’s) $38,693 $40,000 $33,461 $66,272 $80,000 $32,256 $29,517 $30,000 $25,320 $60,000 $22,
Slide 32: Land Loan and Land-Related ORE Locations
Land Loan and Land-Related ORE Locations 4.5% 11.0% Middle TN East TN Other 84.5% > $250,000 properties, approx. $181.1 mm balances 32
Slide 33: OREO valuations remain below actual results
Aggressively Dealing with Credit Issues OREO valuations remain below actual results ORE Dispositions (*) thru ORE Balance at June 30, 2012 June 30, 2012 Loan balances prior to charge offs 100.0% 100.0% Charge off’s prior to foreclosure 21.0% 21.0% Balance @ foreclosure 79.0% 79.0% Valuation losses w
Slide 34: OREO disposition plans
Aggressively Dealing with Credit Issues OREO disposition plans suggest limited unresolved issues (dollars in thousands) Balances Near-term Active Other June 30, 2012 liquidation Projects Properties (1) (2) (3) ORE categories: New home construction/condo’s $ 3 $ 3 $ - $ - Developed lots 4,136 551 3,0
Slide 35: Supplemental Information: Balance Sheet
Supplemental Information Balance Sheet 35
Slide 36: Loan Categories
Loan Categories Comparison of 2Q12 to 1Q12, 4Q11 and 4Q10 Amts. %’s Amts. %’s Amts. %’s Amts. %’s 2Q12 2Q12 1Q12 1Q12 4Q11 4Q11 4Q10 4Q10 C&D and Land $289.1 8.4% $281.6 8.4% $274.2 8.3% $331.3 10.3% Consumer RE 687.0 19.9% 688.8 20.6% 695.8 21.1% 705.5 22.0% CRE – Owner Occ. 601.5 17.5% 590.4 17.7%
Slide 37: Construction and Land Categories
Construction and Land Categories Comparison of 2Q12 to 1Q12, 4Q11 and 4Q10 Amts. %’s(*) Amts. %’s(*) Amts. %’s(*) Amts. %’s(*) 2Q12 2Q12 1Q12 1Q12 4Q11 4Q11 4Q10 4Q10 Residential – Spec $ 12.4 0.4% $ 13.5 0.4% $ 12.4 0.4% $ 19.9 0.6% Residential – Custom 11.8 0.3% 9.7 0.3% 8.5 0.3% 9.9 0.3% Resident
Slide 38: Construction and Land Categories
Construction and Land Categories • At June 30, 2012, 20.8% of C&D book managed by Special Asset Group personnel, compared to 33.5% at June 30, 2011. • 36.0% and 39.0% at June 30, 2012 and 2011, respectively, of land categories managed by SAG. Total Total Total NPLs NPLs NPLs Performing Performing Pe
Slide 39: Analysis of pass-rated AC&D loans
Construction and Land Categories Analysis of pass-rated AC&D loans • Pass rated credits have minimal past dues. Avg. ticket size of about $474,000. Pass Pass Pass Past due Past due Past due Pass to Pass to Pass to rated rated rated 2Q12 1Q12 4Q11 Fail Fail Fail 2Q12 1Q12 4Q11 During During During 2Q
Slide 40: Diversified C&I and Owner-Occupied CRE Portfolio
Diversified C&I and Owner-Occupied CRE Portfolio Construction, 5.7% Transportation and Warehousing, 6.0% Manufacturing, Accommodation and 8.1% Food Services, 4.8% Finance and Insurance, 9.7% Consumer, 3.9% Retail Trade, 7.0% Professional, Multiples Sectors, Scientific, and each less than 1% Technica
Slide 41: Investment Portfolio: Conservative bond portfolio
Investment Portfolio Conservative bond portfolio Average yield on bond Treasuries Corporates portfolio = 3.27% (TEY) 0.0% 1.3% Average life = 3.45 years Agency Notes Municipals Effective Duration = 2.25% 2.5% 23.2% (millions) QTD MBS pass Purchases $ 19.3 thrus Sales ($ 18.3) 63.8% Mat/Calls ($ 4.9)
Slide 42: Investment Portfolio: Municipal portfolio
Investment Portfolio Municipal portfolio Municipal Bond Portfolio Statistics 2Q12 2Q11 Weighted Average Life 4.4 years 7.4 years All municipals are “A” rated or better. % State Agency Holdings 5.20% 4.70% Tax equivalent yield 4.83% 5.04% FMV as % of Cost 108.30% 104.9% As of June 30, 2012 Location #
Slide 43: COF reduction opportunities in maturing CDs
Building Core Earnings Capacity COF reduction opportunities remain in maturing CDs • CD repricing opportunities - $135mm in Client CD’s maturing over next three months. Goal at renewal should be below or near average second quarter renewal rate (0.61%). Client CD’s – Avg. Rate Average Renewal Rates
Slide 44: COF reduction opportunities in MMDAs
Building Core Earnings Capacity COF reduction opportunities remain in MMDAs • MMDA pricing opportunities - $215mm in MMDA accounts with current rates above 1.00%. Target rate should approximate 0.40% - 0.60%. Avg Quarterly Quarterly MMDA Rates Reduction 1st Quarter 2011 1.04% 0.17% 2nd Quarter 2011
Slide 45: Core Deposits vs Non-Core Deposits
Core Deposits vs Non-Core Deposits 6/30/2012 Percent 12/31/2011 Percent Core Funding: Transaction accounts 1,504,450 35.56% 1,354,582 32.96% Money Market accounts 1,557,607 36.81% 1,585,260 38.58% Time deposits less than $250,000 461,600 10.91% 501,705 12.21% Total Core Funding 3,523,657 83.28% 3,44
Slide 46: Supplemental Information: Income Statement
Supplemental Information Income Statement 46
Slide 47: Noninterest Income
Building Core Earnings Capacity Noninterest Income 2Q12 1Q12 4Q11 3Q11 2Q11 Service charges $ 2,439 $ 2,324 $ 2,291 $ 2,362 $ 2,330 Investment services 1,611 1,581 1,402 1,699 1,637 Insurance commissions 1,141 1,288 944 1,002 1,004 Gain on mortgage loans sold, net 1,457 1,494 1,461 1,295 789 Trust f
Slide 48: Second quarter expenses in line with expectations
Building Core Earnings Capacity Second quarter expenses in line with expectations 2Q12 1Q12 4Q11 3Q11 2Q11 Salaries and benefits $17,214 $17,762 $16,230 $15,951 $15,870 Incentive expense 2,023 2,031 2,733 3,065 2,654 Equipment and occupancy 5,053 4,374 4,977 4,943 5,060 Other real estate owned 3,104
Slide 49: Non-GAAP Financial Measures – Efficiency Ratio
Non-GAAP Financial Measures – Efficiency Ratio 2Q12 1Q12 4Q11 3Q11 2Q11 Net interest income $40,185 $39,504 $39,293 $38,356 $37,795 Total non-interest income $9,909 $9,949 $9,727 $10,080 $9,809 Less: Securities gains (99) (113) (133) (377) (610) Non-interest income, excluding securities $9,810 $9,83
Slide 50: Non-GAAP Financial Measures – ROAA Excluding OREO
Non-GAAP Financial Measures – ROAA Excluding OREO 2Q12 1Q12 FY 2011 4Q11 3Q11 2Q11 Net Income available to common $ 7,785 $ 7,206 $37,073 $ 5,681 $ 24,537 $ 4,843 stockholders Other real estate owned expense 3,104 4,676 17,432 4,193 5,079 3,826 $ 10,889 $ 11,882 $54,505 $ 9,874 $ 29,616 $ 8,669 Net
Slide 51: Non-GAAP Financial Measures – Expense/Total Average Assets
Non-GAAP Financial Measures – Expense/Total Average Assets 2Q12 1Q12 FY 2011 4Q11 3Q11 2Q11 1Q11 Total non-interest expense $33,915 $35,820 $139,107 $34,374 $35,676 $34,357 $34,701 Less: ORE expenses 3,104 4,676 17,432 4,193 5,079 3,826 4,334 Non-Interest expense, excluding $30,367 ORE $30,811 $31,1
Slide 52: Supplemental Information: Economic Conditions
Supplemental Information Economic Conditions 52
Slide 53: Unemployment Trends
Unemployment Trends 12.00 • Both Nashville and Knoxville continue to 11.00 outperform at 6.8% 10.00 and 6.4%, respectively 9.00 • State of Tennessee unemployment 8.00 approximates USA 7.00 unemployment Knoxville MSA 6.00 Nashville MSA Tennessee 5.00 US 4.00 53 Source: BERC – Middle Tennessee State U
Slide 54: Nashville Residential Real Estate Market
Nashville Residential Real Estate Market Nashville’s Real Estate Market Continues to Improve 2Q 2012 2Q 2011 % Change Avg. Qtrly. Median Home $175,500 $176,300 (0.5%) Price Quarterly 5,955 4,725 26.0% Closings Quarter end 11,812 13,988 (15.6%) Inventory Months of 5.7 8.2 (30.5%) Inventory (*) Source
Slide 55: Commercial Real Estate
Commercial Real Estate Vacancy Rates Nashville CRE National CRE Vacancy Rates Vacancy Rates Q2 YE 2011 (*) YE 2010 (*) YE 2009 YE 2008 YE 2007 Q2 2012(*) (**) (**) (**) 2012 (*) Industrial / 10.3% 10.1% 10.2% 10.6% 9.6% 8.9% 9.2% Warehouse Multifamily** 4.6% 6.6% 6.7% 9.6% 7.6% 5.2% 4.7% Retail 7.2%
Slide 56: Raymond James Bank Conference
Raymond James Bank Conference Terry Turner, President and CEO Harold Carpenter, EVP and CFO Chicago – August 14, 2012
Pinnacle Financial Partners — Raymond James Bank Conference (August 2012) on 6ix