First Quarter 2011 Investor Call Investor Call Terry Turner, President and CEO Harold Carpenter, EVP and CFO Harvey White, Chief Credit Officer April 19, 2011
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 "expect," "anticipate," “goal,” “objective,” "intend," "plan," "believe," ”should,” "seek," ”estimate,“ “suggest” and similar expressions are intended to identify such forward-looking statements, but other statements not based on historical information may also be considered forward-looking. All forward-looking statements are subject to risks, uncertainties and other factors that may cause the actual results, performance or achievements of Pinnacle to differ materially from any results expressed or implied by such forward-looking statements. Such risks include, without limitation, (i) deterioration in the financial condition of borrowers resulting in significant increases in loan losses and provisions for those losses; (ii) continuation of the historically low short-term interest rate environment; (iii) the continued reduction of Pinnacle Financial’s loan balances, and conversely, the inability of Pinnacle Financial to ultimately grow its loan portfolio in the Nashville Davidson Murfreesboro Franklin MSA and the Knoxville MSA; (iv) changes in loan Financial to ultimately grow its loan portfolio in the Nashville-Davidson-Murfreesboro-Franklin MSA and the Knoxville MSA; (iv) changes in loan underwriting, credit review or loss reserve policies associated with economic conditions, examination conclusions, or regulatory developments; (v) effectiveness of Pinnacle Financial’s asset management activities in improving, resolving or liquidating lower-quality assets; (vi) increased competition with other financial institutions; (vii) greater than anticipated deterioration or lack of sustained growth in the national or local economies including the Nashville-Davidson-Murfreesboro-Franklin MSA and the Knoxville MSA, particularly in commercial and residential real estate markets; (viii) rapid fluctuations or unanticipated changes in interest rates; (ix) the results of regulatory examinations; (x) the development of any new market other than Nashville or Knoxville; (xi) a merger or acquisition; (xii) any matter that would cause Pinnacle Financial to conclude y ; ( ) g q ; ( ) y that there was impairment of any asset, including intangible assets; (xiii) the impact of governmental requirements on entities participating in capital programs of the U.S. Department of the Treasury (the “Treasury”); (xiv) further deterioration in the valuation of other real estate owned; (xv) inability to comply with regulatory capital requirements and to secure any required regulatory approvals for capital actions; and (xvi) changes in state and federal legislation, regulations or policies applicable to banks and other financial service providers, including regulatory or legislative developments arising out of current unsettled conditions in the economy, including implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act; and (xvii) Pinnacle Financial recording a further valuation allowance related to its deferred tax asset. A more detailed description of these and other risks is contained in Pinnacle Financial's most recent annual report on Form 10-K filed with the Securities and d i ti f th d th i k i t i d i Pi l Fi i l' t t l t F 10 K fil d ith th S iti d Exchange Commission on February 23, 2011. Many of such factors are beyond Pinnacle Financial's ability to control or predict, and readers are cautioned not to put undue reliance on such forward-looking statements. Pinnacle Financial disclaims any obligation to update or revise any forward-looking statements contained in this presentation, whether as a result of new information, future events or otherwise. 2
Opening Comments • Aggressively dealing with credit issues A i l d li i h di i • Building core earnings capacity • Building core earnings capacity 3
First Quarter 2011 Highlights Aggressively Dealing with Credit Issues Li k d Qt Linked Qtr Decrease Credit Losses (NCO’s + ORE expense) (6.4%) NPLs (5.6%) NPAs (5.8%) NPA inflows (2.0%) Crit/Class Loans (9.0%) P Potential Problem Loans i l P bl L (23.5%) Restructured Loans (25.3%) C&D Exposure C&D Exposure (9 2%) (9.2%) 4
First Quarter 2011 Highlights Building the Core Earnings Capacity of the Firm Li k d Qt Linked Qtr Increase Total Loans 0.2% C&I and O/O CRE Loans 3.2% Noninterest Bearing Deposits 3.7% Net Interest Margin 3.3% Income Before Income Taxes 13.1% 5
Aggressively Dealing with Credit Issues Credit Losses Decline Slightly $60,000 $60 000 ORE Expense $50,000 Net Charge Offs $3,914 $ , $40,000 $7,411 $30,000 $30 000 $44,579 $20,000 $5,402 $ $33,463 , $8,522 $7,874 $4,334 $8,393 $10,000 $15,123 $1,250 $701 $7,346 $7,146 $9,726 $5,228 $6,789 $4,760 $0 $0 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 6
Aggressively Dealing with Credit Issues Past Dues Indicate Limited New Problems are Surfacing March 31, As a % of Dec. 31, As a % of 2011 2011 total loans l l 2010 2010 total loans l l Nonaccrual loans past due * $ 46,825 1.46% $ 47,662 1.48% Accruing loans managed by Special Assets: Special Assets: > 90 days $ 1,151 0.04% $ 113 0.00% 30 to 89 days 7,704 0.24% 5,329 0.17% $ 8,855 0.28% $ 5,442 0.17% Accruing loans managed by R l Relationship Managers: i hi M > 90 days $ ‐ 0.00% $ 24 0.00% 30 to 89 days 2,785 0.08% 4,124 0.13% $ 2,785 0.08% $ 4,148 0.13% 7 (*) > 30 days past due
Aggressively Dealing with Credit Issues Risk Rating Trends Reflect Decreasing Problem Loan Inflows 8
Aggressively Dealing with Credit Issues Potential Problem Loans and Total Criticized and Classified Assets Continue to Decline 10.0% $700 $627 $614 $598 9.0% sets $600 ans $524 $ Classified Ass 8 63% 8.63% 8 0% 8.0% ns/Total loa $515 9.30% $485 $500 7.0% $443 8.23% 7.18% 6.0% $364 $400 6.95% Problem loan 7.24% 7 24% 5.0% ticized and C 5.31% $300 4.0% 4.03% 3.0% $200 Potential P 2.0% Total Crit $100 1.0% 0.0% $0 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 9
Aggressively Dealing with Credit Issues 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 y > 90 days > 90 days > 90 days (*) 1Q11 4Q10 3Q10 4Q10 Const. and land 12.30% 13.15% 15.28% 14.55% development CRE – Owner Occupied 1.76% 1.89% 2.33% 2.86% CRE – Investment 0.04% 0.43% 1.01% 3.54% Total real estate Total real estate 2 90% 2.90% 3.06% 3 06% 4 01% 4.01% 5 16% 5.16% C&I 1.51% 1.47% 1.72% 1.91% Total loans 2.41% 2.52% 3.28% 3.87% (*) Uniform Bank Performance Report 10
Aggressively Dealing with Credit Issues Decline in NPLs Yields Increased Allowance Coverage 120% $140,000 $131,381 $124,709 103.4% $121,726 $118,331 $120,000 100% ans $103,127 102.1% $100 328 $100,328 performing Loa s ance to NPL’s $100,000 80% 73.7% 73.6% 68.5% 68.2% $80,863 $76,368 82.0% $80,000 60% Allowa 65 9% 65.9% Total Nonp $60,000 40% $40,000 20% 20% $20,000 0% $0 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 11
Aggressively Dealing with Credit Issues NPA Dispositions Suggest $30m ‐ $45m Quarterly Run Rate $80,000 $68,847 $70,000 $60,000 $50,000 $42,022 $43,096 $40,000 $37,251 $33,566 $33,461 $33,461 $30,000 $26,102 $24,026 $20,000 $10,000 $6,777 $0 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Note: Excludes Restructured Loans 12
Aggressively Dealing with Credit Issues ORE is 42% of NPAs with Resolution in Bank’s Control Balances Fair value as a % Average of book value* Appraisal Age in March 31, 2011 Months (dollars in thousands) ORE categories: New home construction/condo’s 9,433 109.4 4.3 Developed lots 12,944 131.2 4.1 Undeveloped land Undeveloped land 18 336 18,336 115.6 115 6 4 0 4.0 Other 15,287 127.3 4.9 Total ORE 56,000 121.4 4.4 � 13 properties > 1 year old � Largest balance ‐ $ 4.1M � All properties in Middle TN � $8.5 million under contract at par or better � $8.5 million under contract at par or better * Excludes costs to sell 13
Aggressively Dealing with Credit Issues ORE Marks at 44.6% of Original Loan Balances ORE Dispositions (*) thru (*) thru ORE Balance at ORE Balance at March 31, 2011 March 31, 2011 As a % ‐ original loan Original loan amount Original loan amount 100 0% 100.0% 100 0% 100.0% Customer payments 10.5% 26.8% Charge off’s prior to foreclosure 20.0% 17.1% Balance @ foreclosure 69.5% 56.1% Valuation losses while in ORE 13.8% 11.5% Balance in ORE 55.7% 44.6% Loss on disposition 5.2% Net realized 50.5% (*) ORE dispositions > $250,000 from 1/1/10 thru 3/31/11 14
Aggressively Dealing with Credit Issues ORE Disposition Strategy • Manage NPLs aggressively • For NPLs where foreclosure is required, proceed with haste • Mark ORE portfolio with current appraisals of < 9 months • Keep average age of ORE portfolio in check 15
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