Second 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 July 21, 2010
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," "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 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 underwriting 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) 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 restrictions on entities participating in the p y , g g ; ( ) p g p p g Capital Purchase Program, of the U.S. Department of the Treasury (the “Treasury”); (xiii) further deterioration in the valuation of other real 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 passage and 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 report on Form 10-Q filed with the Securities and th S iti d E h C i i F b 26 2010 d t t t l t F 10 Q fil d ith th S iti d Exchange Commission on May 7, 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 release, whether as a result of new information, future events or otherwise. 2
Opening Comments Two Important Themes • Focus on aggressively dealing with credit issues Focus on aggressively dealing with credit issues • Building the core earnings capacity of the firm 3
Opening Comments Two Important Themes • Aggressively dealing with credit issues Aggressively dealing with credit issues • Construction book down $113 million since year end ’09 • Increased allowance to total loans to 2.61% c eased a o a ce o o a oa s o 6 % • 2 nd Qtr NCO’s of $33.5 million • Including restructured loans, total NPA’s increased from 5.05% to 5.09% between year end and June 30, 2010 • NPLs and ORE increased by $5 million • Approximately $68.8 million in NPA resolutions during 2Q10 $ • 12 new hires since Jan 2009 focused on Special Assets, Loan Review, and Compliance p 4
Opening Comments Two Important Themes • Building the core earnings capacity of the firm g g p y • Core funding growth at annualized rate of 15.8% during 2Q10 • 4 new branches since June 30, 2009 and 39 FTE’s in customer contact roles • Net interest income growth of 17.00% over 2Q09 • Net interest margin of 3.23% compared to 2.75% for the second N t i t t i f 3 23% d t 2 75% f th d quarter of last year • Loan growth will likely be flat to down for remainder of year • 2Q10 loan decrease of $146 million 5
Commercial Real Estate Vacancy Rates Nashville CRE National CRE Vacancy Rates (*) Vacancy Rates (*) 2Q YE YE YE YE YE 2010 2009 2008 2007 2006 2005 2Q 2010 Warehouse 9.5% 10.6% 9.6% 8.9% 8.6% 9.1% 11.4% ** Multifamily Multifamily 8.8% 8.8% 9.6% 9.6% 7.6% 7.6% 5.2% 5.2% 5.5% 5.5% 6.2% 6.2% 7.8% 7.8% Retail 8.3% 8.1% 6.3% 7.0% 6.3% 6.6% 10.9% Office 13.8% 12.7% 10.5% 10.5% 11.1% 10.6% 17.4% PNFP CRE Portfolio * REIS * REIS Other 11.3% ** As of 12/31/09 Retail 17.5% Comm Const 4.2% Office 11.3% Own/Occ Warehse 46.6% 6 9.1%
Asset Quality Metrics Past Dues and NPLs Expressed as a % of Total Loans within Category PNFP Peer PNFP Peer 30-90 days NPLs and 30-90 days NPLs and past due > 90 days past due p > 90 days y 2Q10 (*) 2Q10 (*) Const. and land 0.89% 2.12% 15.75% 15.35% development CRE – Own Occupied CRE Own Occupied 0 51% 0.51% 0 95% 0.95% 2.61% 2 61% 2 86% 2.86% CRE – Investment 0.02% 1.07% 2.31% 4.06% Total real estate 0.59% 1.45% 4.56% 5.86% C&I 0.47% 0.96% 1.70% 2.56% Total loans 0.66% 1.38% 3.64% 4.55% (*) Uniform Bank Performance Report – 3/10 7
Asset Quality Metrics Other 1.7% $118 MM nonaccruing loans Resid Const Land Develop Land Develop 18.4% 35.9% 3.55% of loan balances Nonaccrual loans $118,331,000 ORE 42,616,000 Total NPA’s $160,947,000 C&I 14.4% NPA’s as a % of Total loans + ORE 4.77% 1 ‐ 4 Family CRE 8.4% 21.2% As of June 30, 2010 8
Net Charge ‐ off Trend (dollars in thousands) $50,000 $44,579 $45,000 $40,000 $35,000 $33,463 $30,000 $25,000 $20,000 $15,123 $15,000 $10,000 $6,789 $5,228 $5,228 $4 760 $4,760 $5,000 $0 1 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 9
Asset Quality Metrics ORE Classifications Balances Fair value as a % Average of book value Appraisal Age in June 30, 2010 (dollars in thousands) Months (dollars in thousands) ORE classifications: New home construct $3,579.2 113.3% 5.3 Developed lots 360.1 106.8% 4.7 Undeveloped land Undeveloped land 30 778 6 30,778.6 112.7% 112 7% 3 1 3.1 Other 7,898.0 108.2% 3.4 Total ORE $42,615.9 111.9% 3.8 � 12 properties with values > $1m � 1 property > 1 year old � Largest balance ‐ $5,000,000 � All properties in Middle TN � All properties in Middle TN � $11.1 mm under contract � Average age of portfolio is 123 days 10
NPA Disposition Activity (dollars in thousands) $80,000 $68,847 $70 000 $70,000 $60,000 $50,000 $50 000 $42,022 $40,000 $33,566 $30 000 $30,000 $26 102 $26,102 $24,026 $20,000 $10,000 $10 000 $6 777 $6,777 $0 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 11
Balance Sheet Strength Strong capital base Dec. 31, , June 30, , June 30, June 30 March 31, March 31 Sept 30 Sept. 30, 2010 2010 2009 2009 2009 Tangible common equity 7.1% 7.4% 7.3% 7.5% 7.4% Tangible common to Tangible common to risk weighted assets 9.0% 9.1% 8.9% 9.1% 9.0% Tier 1 leverage 10.4% 10.7% 10.7% 10.9% 11.1% Tier 1 risk based capital 13.1% 13.4% 13.1% 13.1% 13.3% Total risk based capital 14.8% 15.0% 14.8% 14.7% 15.0% Tangible Common Book Value per Common Share $10.04 $10.60 $10.71 $10.99 $10.80 12
Positive Trends in Core Funding continue Core Funding Relationship Based Non ‐ Core Funding Wholesale Funding 100% 100% 10% 12% 16% 90% 22% 23% 24% 80% 24% 26% 26% 26% 70% 70% 24% 28% 31% 60% 50% 40% 66% 62% 30% 59% 51% 49% 47% 20% 10% 0% 1Q09 1Q09 2Q09 2Q09 3Q09 3Q09 4Q09 4Q09 1Q10 1Q10 2Q10 2Q10 13
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