Fourth Quarter 2014 Investor Call M. Terry Turner, President and CEO Harold R. Carpenter, EVP and CFO January 21, 2015
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" 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 Financial 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 inability of Pinnacle Financial to maintain the historical growth of its loan portfolio; (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 adverse conditions 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 on loans or deposits; (ix) the results of regulatory examinations; (x) the ability to retain large, uninsured deposits; (xi) the development of any new market other than Nashville or Knoxville; (xii) a merger or acquisition; (xiii) risks of expansion into new geographic or product markets; (xiv) any matter that would cause Pinnacle Financial to conclude that there was impairment of any asset, including intangible assets; (xv) reduced ability to attract additional financial advisors (or failure of such advisors to cause their clients to switch to Pinnacle Financial) or otherwise to attract customers from other financial institutions; (xvi) further deterioration in the valuation of other real estate owned and increased expenses associated therewith; (xvii) inability to comply with regulatory capital requirements, including those resulting from changes to capital calculation methodologies and required capital maintenance levels; (xviii) risks associated with litigation, including the applicability of insurance coverage; (xix) approval of the declaration of any dividend by Pinnacle Financial's board of directors, (xx) the vulnerability of our network and online banking portals to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss and other security breaches, (xxi) the possibility of increased compliance costs as a result of increased regulatory oversight and the development of additional banking products for our corporate and consumer clients, and (xxii) 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. 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 25, 2014 and Pinnacle Financial's most recent quarterly report on Form 10-Q filed with the Securities and Exchange Commission on November 7, 2014. 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 report, whether as a result of new information, future events or otherwise.
4Q14 Summary Results Strong loan growth. PNFP exceeded its aggressive 3-year loan growth target Previously Reported Growth 2012-2014 Current Quarter Growth Anticipated Net Loan Growth 3-year Target 11.7% CAGR 3-year Actual (1/1/2012- 12/31/2014) $1.30 Billion 11.5% CAGR 3-year Target $1.27 Billion (billions of dollars) 3
4Q14 Summary Results PNFP’s 4Q14 profitability is already approaching elevated 2015-2016 targets Net Interest Margin 1.05% Noninterest Income/ Average Assets (1) ROAA 3.95% 1.50% 3.90% 1.00% 0.97% 0.97% 3.90% 0.94% 0.95% 0.92% 1.40% 0.89% 0.89% 0.89% 3.85% 0.90% 0.87% 3.78% 3.80% 0.86% 3.79% 0.85% 0.83% 3.80% 0.85% 3.77% 0.81% 3.76% 3.76% 3.76% 1.30% 3.74% 0.80% 1.27% 3.75% 1.25% 3.72% 3.71% 0.75% 3.70% 1.20% 1.21% 3.70% 1.20% 0.70% 3.65% 0.65% 1.09% 1.10% 1.13% 1.09% 0.60% 1.10% 3.60% 1.00% Noninterest Expense/ Average Assets (2) 0.93% 0.94% Net Chargeoff Ratio 2.70% 0.50% 0.90% 2.60% 0.45% 2.56% 2.55% 2.60% 0.45% 2.52% 2.51% 0.40% 2.50% 0.36% 2.43% 2.44% 0.80% 2.38% 0.35% 2.38% 2.37% 2.40% 0.31% 0.31% 0.29% 2.34% 0.30% 2.27% 0.27% 0.24% 0.24% 2.30% 0.25% 0.70% 0.65% 2.20% 0.20% 0.60% 2.10% 0.15% 0.09% 0.11% 0.60% 0.09% 0.10% 0.10% 2.00% 0.05% 1.90% 0.00% 0.50% (1) - Calculation excludes net gains and losses on the sale of investment securities and in the second quarter of 2013 noncredit related loan losses (2) - Calculation excludes OREO expense and FHLB prepayment charges. Noninterest expense for 2Q13 includes the impact of the reversal of a $2.0 million allowance for off-balance sheet commitments --- : Target established in 2011-2013 strategic plan 4 --- : Target established in 2014- 2016 strategic plan
4Q14 Summary Results Execution of fundamentals fuels exceptional growth in key valuation drivers Total Revenues (1) FD EPS ROTCE Earnings Growth $0.53 13.52% (millions) 12.79% $64,697 Up 12.6% yr/yr Up 20.5% yr/yr $0.44 10.83% $57,456 $0.34 $53,363 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 Balance Sheet Growth Total EOP Loans Avg Trans Accts Tangible Book Value per Share (millions) (millions) $15.62 Up 10.8% yr/yr $4,590 Up 15.5% yr/yr Up 16.1% yr/yr $2,276 $13.52 $4,144 $2,038 $12.39 $3,712 $1,666 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 (1) Ex: net gains and losses on sale of investment securities NPA % Classified Asset Ratio ALL % 1.11% 1.87% Asset Quality 1.64% 29.4% 1.47% 0.80% 18.5% 0.61% 18.1% 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14
Loan, Deposit and Fee Growth Yield Operating Leverage Net interest income rises primarily due to volume growth in 4Q14 $50 $50.3 $49.5 $48 $47.2 $46 Net Interest Income $45.9 $45.0 $44 $44.6 $43.6 (millions) $42.8 $42 $42.2 $40.9 $40 $40.2 $39.5 $39.3 $38 $38.4 $37.8 $36 $36.0 $34 6
Loan, Deposit and Fee Growth Yield Operating Leverage Average loans grew 11.4% compared to 4Q13; yields were stable 6.00% $4,400 $4,436 $4,358 $4,200 5.50% $4,251 $4,130 Average Loans $4,000 Loan Yields $3,981 4.88% 5.00% $3,932 (millions) $3,800 $3,845 $3,682 $3,600 4.50% $3,580 $3,489 4.34% $3,400 $3,403 4.00% $3,280 $3,262 $3,200 $3,191 $3,212 $3,207 $3,000 3.50% Avg Loans Loan Yields 7
Loan, Deposit and Fee Growth Yield Operating Leverage Deposits continued to grow while cost of deposits continued to decrease $4,800 1.20% $4,758 $4,700 1.10% 1.01% $4,655 $4,600 1.00% $4,500 $4,519 $4,509 0.90% $4,400 $4,408 Deposit Costs 0.80% Avg. Deposits $4,300 0.70% $4,200 (millions) $4,199 (%) $4,100 0.60% $4,000 0.50% $3,963 $3,950 $3,900 0.40% $3,883 $3,800 0.30% $3,772 $3,700 $3,723 $3,706 $3,700 0.20% $3,642 $3,600 $3,636 $3,597 0.20% 0.10% $3,500 $3,400 0.00% Avg Deposits Cost of Deposits 8
Loan, Deposit and Fee Growth Yield Operating Leverage Expansion of fee businesses produces record fee revenues in 4Q14 4Q14 3Q14 2Q14 1Q14 4Q13 Service charges $3,038 $2,913 $2,966 $2,791 $2,739 Investment services 2,737 2,353 2,164 2,128 2,394 Insurance commissions 1,046 1,037 1,145 1,385 1,015 Gain on mortgage loans sold, net 1,374 1,353 1,668 1,235 1,113 Trust fees 1,274 1,109 1,072 1,146 991 Other: Securities gains (losses) - 29 - - - Other 4,915 4,094 3,582 4,047 4,236 Total noninterest income $14,384 $12,888 $12,597 $12,732 $12,488 Total Assets (Quarterly Average) $5,855,421 $5,752,776 $5,673,615 $5,514,031 $5,388,371 Noninterest income/Average Assets 0.97% 0.89% 0.89% 0.94% 0.92% 9
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