Fourth Quarter 2010 Investor Call Investor Call Terry Turner, President and CEO Harold Carpenter, EVP and CFO Harvey White Chief Credit Officer Harvey White, Chief Credit Officer January 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 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 factors 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 y g p ; ( ) g underwriting, credit review or loss reserve policies associated with economic conditions, examination conclusions, or regulatory developments; (v) increased competition with other financial institutions; (vi) 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; (vii) rapid fluctuations or unanticipated changes in interest rates; (viii) the results of regulatory examinations; (ix) the development of any new market other than Nashville or Knoxville; (x) a merger or acquisition; (xi) any matter that would cause Pinnacle Financial to conclude that there was impairment of any asset, including intangible assets; (xii) the impact of governmental requirements on entities participating in capital programs of the U.S. Department of the Treasury (the “Treasury”); (xiii) further deterioration in the valuation of other real ti i ti i it l f th U S D t t f th T (th “T ”) ( iii) f th d t i ti i th l ti f th l estate owned; (xiv) inability to comply with regulatory capital requirements and to secure any required regulatory approvals for capital actions; and (xv) 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 (xvi) 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 Exchange Commission on February 26, 2010 and most recent quarterly reports on Form 10-Q filed with the Securities and the Securities and Exchange Commission on February 26, 2010 and most recent quarterly reports on Form 10 Q filed with the Securities and Exchange Commission on May 7, 2010, July 21, 2010, and October 20, 2010. 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
Fourth Quarter 2010 Highlights Aggressively Dealing with Building Core Credit Issues Credit Issues Earnings Capacity Earnings Capacity • NCOs • EPS • NPAs • Net Interest Margin • NPA inflows • Non IB Deposits Non IB Deposits • NPLs • Core Deposits • Crit/Class Loans / • C&I Owner/occupied C&I, Owner/occupied • Past Dues CRE loans • C&D Exposure C&D Exposure 4
Aggressively Dealing with Credit Issues • Total NPLs and ORE decreased from $160.9 million to $140.5 $ $ million between June 30, 2010 and December 31, 2010 • ORE constitutes approximately 42% of NPAs • Approximately $37.3 million in NPA resolutions during 4Q10 • Three consecutive quarters of net NPL and criticized/classified asset reductions • Construction book down $194 million, or 37%, since year end ’09 5
Aggressively Dealing with Credit Issues Potential Problem Loans and Total Criticized and Classified Assets Continue to Decline 10.0% $700 $625 $614 $598 9.0% sets and $600 Classified Ass 8 63% 8.63% 8 0% 8.0% $524 $524 /Total loans a $515 $490 9.30% $500 7.0% 8.23% al loans 7.18% 6.0% $364 $400 7.24% 6.95% lowance / Tota roblem loans/ 5.0% ticized and C 4.03% $300 4.0% 3.0% 2.58% 2.59% 2.61% 2.60% 2.60% 2.57% $200 1 86% 1.86% Potential Pr 2.0% Total Crit All $100 1.0% 0.0% $0 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 6
Aggressively Dealing with Credit Issues NPLs Continue to Decline Ahead of Peers NPLs Expressed as a % of Total Loans within Category NPLs Expressed as a % of Total Loans within Category Peer PNFP PNFP PNFP NPLs and NPLs and NPLs and NPLs and NPLs and NPLs and NPLs and > 90 days > 90 days > 90 days > 90 days > 90 days (*) 4Q10 3Q10 2Q10 3Q10 Const. and land 13.15% 15.28% 15.75% 15.66% development CRE – Owner Occupied 1.89% 2.33% 2.61% 3.12% CRE – Investment 0.43% 1.01% 2.31% 3.88% Total real estate T t l l t t 3.06% % 4.01% % 4.56% % 5.23% % C&I 1.47% 1.72% 1.70% 2.15% Total loans 2.52% 3.28% 3.64% 4.22% (*) Uniform Bank Performance Report 7
Aggressively Dealing with Credit Issues Decline in NPLs Results in Increased Allowance Coverage 120% $140,000 $131,381 $124,709 102.1% $121,726 $118,331 $120,000 100% ans $103,127 $100 328 $100,328 performing Loa s ance to NPL’s $100,000 80% 73.7% 73.6% 68.5% 68.2% $80,863 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 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 8
Aggressively Dealing with Credit Issues ORE is 42% of NPAs with Average Age of 141 Days Balances Fair value as a % Average of book value* Appraisal Age in December 31, 2010 Months (dollars in thousands) ORE categories: New home construction/condo’s $ 10,370 101.2% 2.33 Developed lots 14,037 112.2% 4.73 Undeveloped land Undeveloped land 18 675 18,675 112.2% 112 2% 4 73 4.73 Other 16,526 131.4% 4.54 Total ORE $ 59,608 115.4% 4.01 � 7 properties > 1 year old � Largest balance ‐ $ 4.64M � All properties in Middle TN � $8.2 million under contract at par or better � $8.2 million under contract at par or better * Excludes costs to sell 9
Aggressively Dealing with Credit Issues NPA Disposition Activity Suggests Quarterly Run Rate of $30m ‐ $45m $80,000 $68,847 $70,000 $60,000 $50,000 $42,022 $43,096 $40 000 $40,000 $37,251 $33,566 $30,000 $26,102 $24,026 $20 000 $20,000 $10,000 $6,777 $0 $0 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 10
Aggressively Dealing with Credit Issues Past Due Levels Indicate Limited New Problems Surfacing Past Dues Expressed as a % of Total Loans within Category Past Dues Expressed as a % of Total Loans within Category PNFP PNFP PNFP Peer 30-90 30-90 30-90 30-90 days past days past days past days past days past days past days past days past due due due due (*) 4Q10 3Q10 2Q10 3Q10 Const. and land 0.65% 2.03% 0.89% 1.64% development CRE – Own Occupied 0.30% 0.19% 0.51% 0.73% CRE – Investment 0.00% 0.00% 0.02% 0.83% Total real estate T t l l t t 0.36% % 0.57% % 0.59% % 1.17% % C&I 0.16% 0.54% 0.47% 0.72% Total loans 0.29% 0.55% 0.66% 1.14% (*) Uniform Bank Performance Report 11
Aggressively Dealing with Credit Issues Past Due Levels Indicate Problem Loans are Actively Managed Dec. 31, As a % of Sept. 30, As a % of 2010 2010 total loans l l 2010 2010 total loans l l Nonaccrual loans past due $ 47,662 1.48% $ 65,426 2.01% Accruing loan managed by Special Assets: Special Assets: > 90 days $ 113 0.00% $ 3,100 0.10% 30 to 89 days 5,329 0.17% 12,712 0.39% $ 5,442 0.17% $ 15,812 0.49% Accruing loans managed by R l Relationship Managers: i hi M > 90 days $ 24 0.00% $ 539 0.02% 30 to 89 days 4,124 0.13% 5,316 0.16% $ 4,148 0.13% $ 5,855 0.18% 12
Aggressively Dealing with Credit Issues Risk Rating Trends Reflect Decreasing Problem Loan Inflows $250,000 $200,000 $150,000 P/F F/P F/P Net Chg $100,000 $50,000 $0 Q109 Q109 Q209 Q209 Q309 Q309 Q409 Q409 Q110 Q110 Q210 Q210 Q310 Q310 Q410 Q410 13
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